Why Slow and Steady Wins Out When it Comes to Investing

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InvestingHaving 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

 

 

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19 COMMENTS

  1. We invest slow and steady, mostly because we are probably 20 years away from retirement. I feel like we have a lot of time left and I just want to stay on the path we’re on because I know it will lead to a real retirement. We contribute a hefty sum monthly and usually top accounts off around tax time.
    Holly@ClubThrifty recently posted…Why Do People Choose to Be Car Poor?My Profile

  2. We invest in both index funds and individual stocks. Mr. 1500 is in charge of the investing, although I do suggest companies from time to time. Unless you spend a LOT of time doing research, you are going to lose more than you make by choosing individual stocks. It is exactly like gambling.

    Mr. 1500 has a friend who sold at the bottom of the market, and kept his money out during the rebuilding. The tens and hundreds of thousands of dollars he missed out on is heartbreaking. Stay the course is great advice. Mr. Buffet didn’t make his millions by buying and selling multiple times.
    Mrs. 1500 recently posted…5 Tips to Stage a Home on a Budget – A Guest Post from ZillowMy Profile

    • That’s basically what we do Mrs. 1500. We’re roughly at a 70/30 mix between index funds and individual with the majority of the latter being dividend paying stocks with a small handful of some growth stocks thrown in. That research is vital, otherwise you’re basically just throwing a dart and hoping it hits the mark.

      It is heartbreaking to see. I spoke to many people who were in that same boat and while it makes me want to smack my head on one level, it is sad to see.
      John recently posted…Two Baby Expenses I Never, Ever ExpectedMy Profile

  3. I am a big fan of slow and steady investing. I primarily invest in index funds and let them ride. The way I look at it, I am not going to touch that money for 30 plus years, so I don’t worry about the fluctuation and I don’t spend too much time managing it either.
    Deacon @ Well Kept Wallet recently posted…Why Income MattersMy Profile

  4. I’m definitely not trying to risk my money by trying to “time” the market.
    We stick with Index Funds and ETF’s with Vanguard both in Canada and the US. They are cheap and get the job done which is to multiply my money over a long period of time. We also focus on investing as much money as we can.
    Kassandra recently posted…Where Is My Order Amazon Prime!My Profile

  5. If you want investing to be exciting, open up a play account and trade stocks all you want in that account and let your retirement money and money you don’t want to lose alone. This is what I do. Granted, I only trade maybe once or twice a year, but the outlet allows me to not harm my potential by trying to make investing exciting.

  6. Generally, I think investing using fundamental analysis is the way to go. It makes the most sense for most people. I toyed with getting into trading and using a technical-analysis only investment strategy, but I’m not willing to commit to the time and technique to go that route. I think slow and steady really will get the job done for me. And it seems to be that way for most people!
    Natalie @ Financegirl recently posted…8 Ways To Prepare Financially For A BabyMy Profile

  7. I always hated when I sat down with clients as their financial advisor and they wanted to know what were the “quick and easy” ways of making money in the markets. And then I would share with them that that was the wrong view and they needed to adjust the mindset because if there were quick and easy ways to win in the markets, we would all be millionaires. After sharing this, I would get blank stares. It’s so true, though, slow and steady will always win, you just need patience and a plan.
    Shannon @ Financially Blonde recently posted…You Can’t Win Them AllMy Profile

    • I saw the same thing Shannon. I just wanted to shake them because their view was entirely off. Then they would go off about making boatloads of money in penny stocks and I’d want to scream, lol. It seems too easy, but patience and a plan will be your best friends when it comes to investing.
      John recently posted…Don’t Be Afraid to go Back to the BasicsMy Profile

  8. Interesting perspectives held by all – sounds like most of us are of the same mind. I’m all for investing through dollar cost averaging and making sure you’re taking on the right amount of risk for your tolerance and situation.

    Having an asset allocation that matches up with your risk tolerance and goals with rebalancing every couple of years is a recipe for success.

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