Having worked in the investment industry for more than a decade, I got to see my fair share of investors. Most had their own unique circumstances, but the ones who always made me shake my head were those who viewed investing in the stock market as some kids game filled with excitement.
While it may not be sexy or exciting by any means, slow and steady is generally the approach you want to take in your investing. This is true if you’re just starting out and investing with little money or are someone who has been at it for years with a sizable portfolio. This will, of course, need to be modified to match your specific investment needs but quite often the simplest approach is the best.
Investing Should Not Be Exciting
One of the main problems with making investing exciting is that it often makes things more difficult for you and will likely cost you money in the long run. However, if you listen to the talking heads, they’re going to be talking about this stock or that stock. This is fine, on one level as their job is to get ratings and not to know the particulars about your specific investing needs.
What is commonly overlooked in these situations is that you’ll be spending more money in trading commissions, not to mention the fact you’ll be defeating your efforts to grow your wealth. Why, you ask? Well, it’s because study after study has shown that those who sit in the market for the long haul with a diverse portfolio are the ones who come out ahead. If that’s not enough to convince you, hopefully the rest of it will.
Invest Like Buffett
I live in Omaha, Nebraska which is the setting of the Berkshire Hathaway annual meeting. I’ve been to the meeting a half dozen or so times and love hearing from Warren Buffett as he expounds on different things going on in the stock market. In the midst of his speaking he states numerous times that he is not concerned about quarterly, or even annual returns. He is also certainly not concerned with trends, but sticking to his principles.
What does he look at then? He looks at the long term and since his holding period is notably forever you can imagine how long term that is! The reason why I like Buffett’s approach to investing is that at its core it’s simple. He promotes investing in what you know as well as investing in low cost index funds.
I believe that either of these approaches, especially the second one is a great path to follow as you start investing in the stock market as it’ll allow you to stay with the market instead of chasing the fools errand of timing the market. It’s also the simplest way to invest for those just starting out. If it’s good for Buffett, then it’s good for us, regardless of the scale it’s on.
It’ll Get You to Where You Want
Slow and steady wins the race when it comes to investing because it’ll generally allow you to get to the destination you want. Yes, there are anomalies which will allow you to garner a nice gain, but growing wealth takes time and you want to keep it as simplistic as possible.
The people I spoke with in my brokerage past who were the most successful were the ones who followed the slow and steady approach. They weren’t chasing after gains, they were mindful of their investment fees, and they started investing as soon as possible. Yes, it meant they lost out when everyone else did when the market plunged, but it also meant they were reaping nice gains as the market rebounded unlike many of those who stayed away out of fear. I know it can be easier said than done, but often times the boring, slow and steady approach is the wisest and best approach to take as it’ll get you where you want.
What approach do you like to take with your investing – exciting or slow and steady? What is your time frame when it comes to investing in the stock market?
Photo courtesy of: Ron Alford