There are plenty of fancy investing strategies out there “guaranteed” to maximize your investment returns and all that other stuff. This is not a post about that. This is a post to remind us all of the three simple rules that will keep you from going crazy and “losing your shirt” when it comes time to invest your hard-earned dollars.
1. Invest in What You Understand
No matter how good something sounds, if you don’t understand it, you’d better not commit your money to it. That’s a pretty good rule for life in general. If you have a good, solid understanding of the futures market, options and calls – go for it. Wear yourself out. But I’m not interested in being that “sophisticated” or risky with my investing. On the flip side, I am quite comfortable in the world of savings accounts, CDs, money market accounts, stocks, mutual funds and bonds (to name a few). So I’m going to look at those options and pick what I believe to be the best. That sort of leads us to the second item…
Let’s consider a situation: I’ll give you $100,000 if you’ll become an expert on the ins and outs of your retirement finances. Sound good? Well…I won’t give you that money, but if you’ll learn about investment types (including pros and cons), educate yourself on different options for investing your money, then it’ll give you a return that could make my $100,000 offer seem like small change. If all you understand is a basic savings account, great! Put your money there for now. But don’t leave it there! Learn what is next that will earn better returns at an acceptable level of risk for your age and situation. Constantly be learning.
3. Be the Tortoise
Unless you’re already at retirement age, you shouldn’t look at the investment game as a sprint. It is a marathon. You are not looking to make 15-20% per year EVERY YEAR and if you’re expecting that, you’re in for a rude awakening. That’s not how investments work (in 99% of cases). You should expect to enjoy ups and endure downs. You’re the tortoise. Run your race toward retirement at a steady pace, continually improving your strategy and investing with diligence and patience. Let the market do what it will. You’re looking 10+ years into the future and expecting great things when you invest…not looking simply at next week, next month, or even next year. Be patient and run your race.
Need more guidance for your specific situation? Maybe we should chat.