I considered including a few pieces of advice on investing in my previous advice blog, but decided I probably had more to say about the subject than would fit. As it turns out, I probably have more to say than I can or should fit into this blog, so I’ll try to keep it short and sweet.
First of all, I am an amateur investor. I have no credentials, street creds, special training or education in investing. I’ve never taken a finance or economics course. I’ve never read books on the subjects. But I’ve done it for my family for decades with reasonably good results. As my CPA would say, “I don’t swing for the fences, rather, I try to get on base and patiently and methodically work my way around the diamond.” I am a conservative investor. I am not a trader, although, I do trade, but very rarely. I offer a few words of wisdom about investing which I consider to be sound advice.
Don’t invest any monies you can’t afford to lose. There are no sure things. Don’t believe anyone who says otherwise.
Don’t believe anyone who promises a specific rate of return on stocks. In particular, don’t believe anyone who guarantees a rate of return greater than 7-8%. No one knows with certainty. There is risk involved in investing in stocks. There is also reward.
Don’t chase returns. This used to be sound advice, and I happen to believe it still is, but I’m aware that some well-publicized traders have been amazingly successful, at least in the short term, using this method with the Big 7 during the past year. Not me. I don’t do that. I believe that in-depth research of credible web sites and other resources can ultimately lead to success, but one can never be sure.
Don’t put all your eggs in one basket. I believe in starting off with index funds and mutual funds managed by reputable investment companies, so that you’re investing in a number of securities at the same time. Some will end up winners, and some will end up as losers, but with solid management, the winners should eventually outpace the losers. I never buy one individual stock, If I buy a stock, I also buy a few other well-researched stocks to soften the blow of any one that turns out to be a poor investment.
When I started off, I invested in two or three individual stocks. I became impatient with them and ended up selling them all within two years. Big Mistake. I had done my research better than I had realized, but I lost faith in the stocks. One of them was Apple. The others also turned out to be long term winners. I then invested in mutual funds. Most of them turned out well, and I still own most of them. But of course, none of them turned out as well as Apple.
Choose the right kind of account to accommodate the stock. One of the worst mistakes I made was to place an oil & gas limited partnership stock in an IRA. I ended up having to pay considerable taxes when I sold the stock. It generated considerable taxes because it generated considerable income while it was growing unchecked in the IRA. Overall, it was a real winner, but it would have been even better if I hadn’t had to pay all those penalties and interest. Darn. Learned my lesson there.
Choose index funds and mutual funds with reasonable expense ratios. Pay attention to how and when expenses are deducted from your positions. Estimate what expenses will cost you. Don’t overpay.
Diversify, diversify, diversify.
I invest conservatively in bonds, but I don’t understand them well enough to recommend them to you.
Don’t invest until you understand what you are doing.
Don’t invest until you understand the terminology used in your research. You can’t understand what you’re reading or watching if you don’t understand the terminology. There is considerable jargon to learn. It’s a whole new language. And it grows daily. I regularly look up the meaning of new terms.
Accept that some of us are financially oriented, and some of us will never get it… maybe not even with extraordinary effort to do so. Don’t invest if you don’t get it!
If you don’t invest, then you either need to generate considerable income working or do an extraordinary job of controlling expenses and saving so as to set aside adequate funds for retirement. Controlling expenses and maximizing savings enhances rewards gained from any investment strategy.
Be very careful if you hire a professional to manage your investments. Understand how and when they take their commission. Be familiar with their return history. Understand the concept of “churning.” Don’t hire your brother-in-law. Don’t hire someone if you can do it for yourself. Fire your manager if you no longer trust him. Don’t be shy.
Keep up with the market. Invest the time. I still watch Bloomberg and CNBC and read Business Insider at least 8 hours a week, usually more. I watch the other channels, too, from time to time, but I avoid them when they are spending too much time on politics and other non-business subjects. I lose patience with channels that either don’t identify the credentials of their so-called guest experts or that don’t leave the credentials posted long enough for me to internalize them. I avoid anchors who spend time interviewing fellow business anchors and commentators from the same channel. I want to hear from primary and knowledgeable sources. I avoid anchors who deliberately lead their guest commenters to espouse specific political philosophies. I avoid anchors who give me too much opinion and not enough facts. If an anchor claims that certain legislation will be good for the coal-mining industry profits, then I want to see charts and graphs that back up those claims. And the charts and graphs should be based on reputable sources. I pay little attention to charts and graphs that don’t identify where the data comes from.
I keep up with the non-business news, paying particular attention to weather, scientific discoveries, newly-enacted legislation and other factors that influence the market.
Remember, don’t invest if you don’t get it. It’s too big a risk. Good Luck.
I have worked closely with many physicians during my career in acute health care. They were all highly intelligent. Most enjoyed a large degree of common sense… only a few did not.
Before I owned a Smartphone, I owned a Flip phone… a very good flip phone. I selected it carefully, planning to use it for years. It worked fine, great even, and I enjoyed using it. It was small, convenient, sturdy and protected in its own attached hard-shell plastic case. It didn’t break whenever I dropped it. Even better, it fit perfectly into my cross-body bag. It even met military specifications.
SPOILER ALERT: The following sounds suspiciously like a rant.
Years ago, it snowed in Houston on Christmas Eve, a very BIG DEAL. Early Christmas morning, Chocoholic and Jack, our beloved Black Lab, and I drove to a nearby park. The day was grey and overcast, and the snow was still on the ground. We took a box of crackers and cans of cat food to feed the ducks and the feral cats.
Sometime around the start of the pandemic lockdown, I promised my sister that I would find Grandmother’s Cook Book. Lynn wanted a copy of a favorite cookie recipe. I finally found the book the other day, some 3 years later, cookie recipe included. Lynn graciously avoided mention of the long delay and said that she’d get right on it.
Wildlife sightings began ticking up in mid-June, probably as a result of rain and increased forage. Deer were everywhere, causing Flash and me to occasionally interrupt our walking. A young doe careened around nearby yards in the early mornings, acting a little crazy.