Some basic principals on investing for the long term.
Here are 3 simple steps.
Step 1. Disregard any news headline you read.
Step 2. Invest $1 for every hour you work each week.
Step 3. Focus on the horizon and enjoy the ride.
For you free spirits out there, that’s it. Boom, problem solved.
For you nerds out there, here are the details:
Nothing means less for your investments than today’s headlines. There will always be a crisis in the news.
Pearl Harbor 1941 to Truman Upset Victory 1948 over 10% gain in the market, Korean War 1950 to the Cuban Missile Crisis 1962 over 16% gain in the market, OPEC Oil Embargo 1973, plus the Continental Illinois Bank Failure 1984, including Black Monday – Market Crash of 1987 to the Gulf War in 1991 over 22% gain in the market.
The market is resilient.
Invest $1 for every hour you work. Regardless of what you start with, regardless of your age 21 to 65, I am trying to teach you the most valuable thing you will ever, ever learn or read about investing. Dollar Cost Averaging, in other words invest in equities every month, of every year for the rest of your working life. At age 65, double check to make sure you have picked the Great Companies of America and the World (dividend paying stocks). By that time, those investments will invest $1 on your behalf for every hour you don’t work.
What if you are 60 and you have not saved $1, well, you can still take my advice and you will be thankful at age 90 that you read this post. It still applies because you will still have to work.
“What if I already invest more than $1 for every hour I work.” … Great, if you have questions call a financial professional or post questions in the comments. If you want to talk about Day trading, don’t reach out to me. In that case, just go to Las Vegas, you can waste plenty of money there and have more fun doing it.
“What do I invest in then?” Start with the Keep It Simple Stupid approach:
1: 25% to the Standard & Poor’s 500 (S&P 500) Stock Index
2: 25% to the Dow Jones U.S. Completion TSM Index
3: 25% to the MSCI EAFE (Europe, Australasia, Far East) Index
4: 25% to Pick an ETF that interest you.
Set these to rebalance annually.
Lastly, focus on the horizon (Take a long term perspective) and enjoy the ride (the market is going to go up and down a lot). We are entering a season of extreme volatility, don’t blame or credit Trump too much. This season of volatile markets was scheduled by the Federal Reserve in 2008. It has very little to do with Trump or Hillary for that matter. I could tell you about printing money, quantitative easing and the Monetary Base, but I don’t have to. I just need to tell you, don’t panic, follow Step 1 and repeat.
You will read these headlines “Market Drops 1000 Points, First Time in History” do not sell, stick to your guns, follow Step 2. You will read this headline “Market Hits All-time High” do not invest more, stick to your guns, follow step 2. You will read this Headline “Buy Biotech, Energy, Pharmaceuticals and Defense” refer to Step 1.
I hope this helps.