The other day my article on this blog was about making wise financial decisions. You may want to go back and read it if you haven’t already done so. Today, I want to speak a little more about finances, and particularly about investments. Right now many are out of work, and the last thing they want to think about is investing money. Many are just hoping to have enough to pay their bills and keep food on the table right now. That’s OK, but this isn’t going to last forever. Eventually, we will return to work, clear up our financial issues and need to think about the future. I am not a financial adviser, so please remember this as you read this article. I am just sharing what I think is common sense and what works for me. I do use, and highly recommend that others use, a financial adviser.
I’ve had very little training in money management other than what I’ve got from podcasts and a few books I’ve read. I’ve had even less instruction in investing money. But, I have learned a few things along the way that has worked for me. One, is I avoid investing in individual stocks. The one exception to that is we do have a few shares in a local bank which I bought several years ago when the bank rolled out an IPO. My attorney at the time highly recommended I purchase those shares which we did, and we still hold them as part of our investments. Otherwise, our investments are all in mutual funds.
Good mutual funds managed by reputable people will follow the market over time. They are solid investment tools for the person who does not have the expertise nor the time to study the market well enough to invest in individual stocks. Yes, you might make more by owning certain individual stocks, but your risk is higher as well. Over the long haul, good mutual funds make a solid return on investment.
The second thing I learned is to not pay attention to wild market fluctuations. During this recent pandemic we’ve seen the stock market swing widely from one day to the next. Some people panicked and withdrew their money. Doing that only made it impossible for them to recoup their losses when the market improved. If you check out your large investors such as Warren Buffett and Mark Cuban it’s likely they’ve been buying stocks during this downturn. They know this is the time to be buying quality stocks at bargain prices. During the 2008 market meltdown I didn’t even open our quarterly statements. I knew our retirement accounts had lost money. I didn’t need to read the statement to know that so why bother reading bad news. The market always comes back, so I’m a believer in riding out the storm.
I think it was Buffett who said that if you aren’t willing to own a stock for 10 years don’t own it for 10 minutes. He is well known for taking the long approach to owning stocks. If a mutual fund is solid today it is likely to be good for a long time unless something totally unexpected happens. I’ve never understood the mindset of day-traders. I have a feeling they enjoy talking about how much money they made on a trade today but spend a lot less time talking about their losses. That’s gambling, not investing.
The final thing I’ve learned is to use a good investment adviser. I’ve mentioned previously my appreciation for Dave Ramsey and his financial wisdom. He has financial advisers that he recommends who will not only work with people like me with smaller investment portfolios but also have very low commission fees. We use one of them and appreciate him a great deal. He recently came to our home to discuss our investments and see if we had any questions. Many advisers would not even take handle our business because it would not meet their minimum threshold. In the case with this individual, we get an annual home visit and phone calls throughout the year. It makes us feel very safe, and if he recommends shifting funds a little here or there we’re willing to accept his advice.
One day you will retire. If you want to retire with dignity, you need to be planning for it now by choosing to invest your money wisely.