Investments costs can hurt your returns, but it’s one of the few things you can control. Investing in low-cost index funds to “own the market” is the best way to keep your costs as low as possible. Index funds also have minimal trading costs and no management fees with total expenses that are significantly less than actively managed mutual funds or ETFs.
Most individual investors should own a total of 7-10 index funds which are diversified, and then rebalance once a year. And literally do nothing else.
Investors get fixated on the ticker quotes that run across the screen, but there are times when the stock prices have nothing to do with a company’s long-term outlook. Stock prices may mess with investors’ emotions, but it won’t necessarily affect the company’s future. As an investor, you need to know the difference between price and value. And you should focus on getting good investments at a reasonable price.
It’s important to look at your returns, so you can get back what you need to achieve your financial goals. If you’re investing in low-cost index funds, you’re getting back market returns (minus costs). You won’t need to switch to a “better” fund to increase your returns. You should rebalance by selling the funds that have gone up higher than what you expected. And with the money you got from those sales, you can invest in other funds with prices that have gone down. This is one way to take advantage of buying low and selling high. Rebalancing can help you to manage your investment risk and keep your portfolio working in a way that will help you achieve your financial goals.
Whether you’re investing on your own or working with an advisor, it’s important to educate yourself about the market, how to invest, and how to plan for your retirement. There’s more than enough noise in today’s 24-hour news cycle, which comes from a lot of different places and in a number of ways. That’s why you want to learn as much as you can.
Your investment strategy should be something that matches with your life goals and ambitions, so don’t make changes in your portfolio on a whim or because you heard a rumor about a market shift. You want to take advantage of any advice you hear, but you don’t want to change your plan completely. Large shifts should be saved for times when you have met your goals or when your circumstances have changed.
Emotion is the biggest enemy to individual investors achieving a successful long-term rate of return.
Investors are rewarded by being patient. You want to sit back, look at what’s happening, and plan your next move. The market will move on a regular basis, so don’t get scared if it’s not moving the way you should. Look at overall trends. And unless you’re absolutely sure it’s the right time to sell, be sure to hold your position. If your investments are moving more than you would like, shift into more modest investments. While they may give you less opportunity for larger short-term gains, they may have less volatility and are easier to track.
Some of the best investments you can make are more dependable and have low volatility. While they may not give you as much upside in the near term, these “boring” options can be great for your long-term investment strategy. Slow and steady truly wins the race.
There’s one important lesson that every investor should pay attention to – that “if it seems too good to be true, it probably is.” Don’t fall for pyramid schemes or unlikely investment scenarios. Make sure you do your research, and avoid working with people who aren’t being honest. If they tell you there are risks and that you’ll have to make some sacrifices along the way, chances are it’s a good investment. But if they promise red Ferraris and Sunseeker yachts after the first day, the opportunity probably isn’t legitimate.
If you want to know more about how you can invest in a way that will give you positive growth, be sure to get in touch with Trevor Shakiba at Shakiba Capital.
If you want to build long-term, indestructible wealth, investing consistently into real estate which cash flows should absolutely be an asset class within your overall portfolio. Whether you have $100,000 or $1 million, the math is the same, and more importantly getting paid while your investments appreciate is powerful!
In this webinar/podcast Trevor reflects on the past 12 months with Exit Advisors while also evaluating the present and near term outlook for the future. He also goes through his own personal investing strategy with a specific emphasis on diversification and why everyone should own real estate.