5 Quick Tips For Milking Your Money in the Market
As we move ahead with this diabolical ARS issue, its becoming more and more clear to me that the way Americans might be best suited for investing is a little more robotic and a lot less emotional. At least on some level. I am guilty of making decisions within my portfolio that are less than admirable and some I am even embarrassed about. But I have also had a few times where I really nailed something and I have seen it pan out really well. This whole thought process is an evolution, at least, it seems that way as financial are so improperly addressed in formal education settings. This all became very well illustrated in a little blurb in Money Magazine that I would like to paraphrase and expound on for a few…
Print this list out and put it in a place that you see frequently on a daily basis:
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Step out and you miss the point- Had you invested in an S&P 500 index in August 1997 and done nothing 10 years, you would have realized an 88% return. Had you missed just 20 days out of all of that, you would had a 20% loss. Market returns come in bursts. Be patient and weather the storm.
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Remove your emotions- Invest automatically. Start with a small amount and have it automatically transfer. ING is doing it, Sharebuilder is doing it, and since they have merged, you can even get a deal on trade fees by doing both. Check with your bank, they all do it. If not, change banks because this has been around almost since money has been invented and if your bank doesn’t do it then they are doing something wrong and you should not have your money with them. Fire and forget and take a look in a few months and when you do, leave a comment here and tell us how surprised you are.
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Focus your control- It is impossible to time or predict the market. There are about 300 million variables that you simply cannot account for. The one thing that you CAN control is fees and costs. Minimize them and do research so that you know you aren’t getting hosed. Assuming an 8% annual return, if you invest in an actively managed fund with a 1.5% expense ratio versus an index fund that charges 0.2%, you will give up almost 20% of your profits.
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Give yourself a taste of power- Set aside a small portion of your investment monies, like 5% perhaps, and have that be diverted to the wild hunches you get. It will feed the craving of being rewarded (or punished, depending on who you talk to) and your gut feeling will be exercised without a huge blow to your whole portfolio.
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Seek help- If you start jerking your money around every time the market flinches, get a pro to help you. You need advice and it will be cheaper for you in the long run to have a financial planner fee rather than taking your money out and you miss an opportunity when you should have been sitting tight.
These sound harsh and a little extreme but think about it…If you are cautious and take a good hard look at what you are putting your money in, you will be fine and it will all be worth it.
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Comments
Nice tips for being in the market. It’s real easy to get excited and throw some money at an idea only to get frustrated when it doesn’t make you a millionaire real quick. The real key is patience and time.
“Had you missed just 20 days out of all of that, you would had a 20% loss.” That’s amazing.
Thanks for the info.