If you’ve been a reader of Sprout Wealth for long you know we like to talk about outside the box ways to growing wealth. We believe that kind of thinking is vital to really give trajectory to your wealth building efforts. That’s not to say you can’t make money without getting out of the proverbial box, just that it can really help give you a much needed boost. All that said, there is one very key area where outside the box thinking isn’t really necessary and, in some cases, can actually hurt you – and that’s investing in the stock market. If you don’t believe me, hear me out.
Thinking Outside The Box Can Cost You Money
I saw this bear true every single day when I was working as a broker. I would speak with several dozen outside the box thinkers everyday in fact. These were people who were making investing something it shouldn’t be and it only cost them money. Many times this was investing in something they didn’t understand but more often than not it all pointed back to one thing – constant and regular trading.
Don’t get me wrong, there are many good traders out there. They make a living at it, but those doing it well are far and very few in between. In fact, trading was often their day job. They spent hours at it charting individual stocks and made relatively educated decisions. That’s not to say that they would always end up in winning trades, of course, but when they won they would win big. The rub though was that describes a very small select group of traders and most others would be on the losing end of the stick to the tune of thousands, if not more, of commissions. Taken over the course of a number of years that cost can and will be detrimental to an investment portfolio. I’ve spoken to far too many who consider themselves traders to know this is true.
Investing Should Not Be “Sexy”
This is where I think many who trade too actively trip themselves up. Their perspective is off. They view investing in the stock market as relatively equivalent to gambling (which is a debate for another day) and treat it as such. They go whale hunting looking for those massive wins only to see that it’s costing them tens of thousands of dollars…at best.
Not only that, but they also lose sight of how those losses will impact them 10 or 20 years down the road and continue down the path of racking up loss after loss trying to recoup what they’ve lost. Again, this is all about perspective being off. They try to make investing something it shouldn’t be by trying to make it sexy, and only end up hurting themselves in the long run.
What Sexy Investing Really Is
As we start out this New Year you likely have a goal or resolution that goes back to money and growing it. When you start to apply that to investing, please do yourself a favor and remember that your future self is depending on you now. That said, don’t turn investing into something that it shouldn’t be. Instead, remember that slow and steady wins the race.
If you look at my thoughts on the best investing books for beginners, you’ll see that they all go back to the same theme. They promote staying with the market and looking for ways to cut fees. The question then comes as to what that looks like. Most often that points back to investing in broad based index funds and solid dividend paying stocks that help you stay with the market. Then, you just rinse and repeat over the stages of your investing life, adjusting as your situations change.
I know it’s not sexy. I know it may not be exciting. But, investing really shouldn’t be and if it’s good enough for Warren Buffett, then I think it’s good enough for the rest of us. 😉
Do you like to think outside the box when it comes to investing? What kind of approach/mentality do you take to investing? How much money have you lost over the past year in commissions or fees?
Photo courtesy of: Trading Academy