Simple Is Best!
You’ve heard it all, and probably thought to yourself at some point, as well.
Investing is for the experts. Investing is too complicated for me. The market is unpredictable!
Investing can be as simple or as complicated as you’d like it to be. As I learned more about my own personal finances and about investing in one’s future, I’ve decided that I would be a long-term investor. While others may have the stomach to play the short-game, I am an advocate of long-term gains.
The reason being is that investing for the long-term allows for the simplest approach to growing your wealth.
At the heart of my financial philosophy is simplicity. I strongly believe that building the best foundation for your finances allows for more nuanced bets and risks later in life. But, absolutely first, you must focus on building your foundation to be one of considerable strength; able to weather any financial or life crisis which inevitably will hit us all.
Investing for the average American is a foreign, mysterious term meant to instill both fear and wonder. It is how so many people get talked into spending money on financial advisors and financial investment managers that charge an arm and a leg for their services. This is not to discredit their occupation as I believe they are highly productive members to society and much-needed, but they should serve to complement and improve your financial strategies, not create them from the ground up.
A more highly complex investment strategy, with multiple moving parts, is more likely to fail compared a relatively simpler and more consistent path.
Index Funds Work For The Long-Term
There is absolutely no such thing as a risk-free investment. Every move in life involves some level of risk, especially if it includes your finances.
Remove the illusion that there will ever be a guaranteed return on your money with any investment and you will be placed in a better position to make objective decisions.
The path I have decided for myself is to primarily invest in index funds that track stocks. Stocks provide the largest return over a long period of time, albeit the ride will be bumpy. I have made peace that sometimes there will be dips and downturns, but I am confident that the returns over a long 20-30 year period will average 5-8%. America has always recovered from its down-turns.
Some questions to ask yourself is how much of your strategy is tailored towards growing your wealth and how much of it is tailored towards managing your wealth. You can allocate the proportions of your investments accordingly between both index funds tracking stocks and index funds tracking bonds.
Start Early, Start Early, Start Early
The earlier in life you start building your financial nest egg, the quicker you will see it go to work for you. While it hurts to buy these investments as opposed to that new handbag or watch, you can think of these investments as buying your future freedom. And, that in itself, is extremely gratifying.
Of course, even if you are older, it does not mean that you necessarily have to allocate more of your investment portfolio towards bonds. Inflation is a real monster and the rate of inflation can outpace the returns on your bonds over a certain period.
If you consider the growing average life expectancy, with improving health data and technology, human life expectancy is still on the rise. Invest for the long-term and sacrifice a little bit more early in the game.
Put yourself in a position to succeed in the future and you will be thanking your 20-year-old, 30-year-old, 40-year-old self.
I’m not sure about y’all, but I absolutely plan on still being actively kicking, mentally and physically, even when I’m 70 and money is the last thing I want to worry about at that age.