Investment Advice for the Next Ten Years|
by Tom Madell, Ph.D.
Given that many of us would rather not think too much
about our investments now, the following ten thoughts are
designed to be a quick read.
Thought 1: The Best Investment For Some People May Be One
with Low Volatility
Stocks are great except when they are falling. So, if you
don't like heat, you may not want to be in the kitchen.
For all their volatility, stocks have proven to be a good
investment for those who could withstand the drastic
movements and hold on for 10, 20 or even more years at a
time. If you can't honestly say this describes you, then
Thought 2: Don't Gamble - Invest.
If you were gambling, perhaps you had hoped to get rich by
riding the huge past gains of stocks, the same ones chosen
by the masses of other people.
If you were investing, you sought out holdings that, while
not chased after by most others, offered the possibility of
decent returns for those who were patient.
Thought 3: What You See Is Rarely What You Get
Most people think that what is happening in the present
foretells the future. However, in investing, this is
usually not true, especially when the present "goes to
extremes". After a multi-year rally is rarely a good entry
point; after a multi-year fall is rarely a good time to
assume the worst.
Thought 4: Does Everything in Your Life Go Smoothly?
More likely, most things do not. So, don't think that it's
going to be any different for investing. We all face big
setbacks and tremendous challenges. That's how it is. But
people who persist are usually the ones who come out ahead.
Thought 5: Wake Up and Smell the Alternatives
The word "invest" has meant only in stocks for far too many
people. If you want to do better as an investor, you should
study up on other options as well. Don't want to risk all
your money in stocks? Bonds are almost always a better
investment than money market funds and your friendly bank.
Thought 6: Don't Follow the Advice of Others When Making
That's because everyone's situation and risk tolerance are
different. You shouldn't follow the advice of anyone unless
it fits with your picture of things. However, you should
listen to what other people might advise and then see if,
and how, you might incorporate what they are saying into
your own view. The same is true if you pay an advisor; make
sure that advisor is on your wave length!
Thought 7: The Next Ten Years May Not Be So Good for Stocks
Although this may be true, what alternatives do you have?
Keeping your money in a money market account? - probably
not a good idea. Making sure you own your own home? -
perhaps, but face it, real estate is subject to the same
types of highs and lows as stocks, and I don't think homes
can indefinitely go up in price at abnormally high rates
Best idea: Invest in a variety of different things,
including a variety of different categories of mutual
funds, not just in large cap U.S. stocks.
Thought 8: Are We Really Headed Out of Recession?
Well, that has certainly seemed to be the case up to now.
But what if the worldwide stock debacle continues? It is
hard to believe that if people and companies have lost as
much as it now appears and this does not turn around soon,
that our economy can avoid turning downward. Ironically, if
this happens, as unfortunate as this would be for the
country, it would likely lead to continued good performance
for holders of secure bonds.
Thought 9: Are We Becoming A Country of "Family
Are we becoming a country where each household primarily
resembles a profit and loss entity, almost like a separate
business? Within such a climate, many of us feel compelled
to work ridiculous hours and endure outlandish commutes.
And we really feel the pressure to be home owners and the
resultant pressure to maintain our home's value. And now,
on top of the other pressures, we have our stock and mutual
fund investments to worry about as well? It's no wonder
that we're all feeling more than a little stress these
days. It all seems to revolve just a little too much around
money. Is this how you want to live? Let's think about
relaxing all this a little.
Thought 10: There are 10 Letters in the Word "Investment"
If you think of each letter as representing a year, then
you will be reminded of the true purpose of a long-term
investment (as opposed to a gamble) - to help you achieve a
better life 10 or more years down the road. Anything less
than that means you probably aren't really investing;
you're probably trying for something that's more like the
lottery than able to reliably help you reach your goals.
This article courtesy of http://www.investment-index.com.
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