This is the third part in my series on ways to invest your money, click here to read part one and/or part two.
I know I’m not alone when I say that I have a love-hate relationship with variable accounts.
Variable accounts/investments are any type of investment that has the potential to go up or go down. These would include: stocks, mutual funds, variable annuities, real estate, hedge funds, etc.
I love ‘em when they are going up, and I hate ‘em when they are going down!
If you are going to invest some of your money in a variable account, here are some of my Do’s and Don’ts.
The Don’ts:
1. Don’t use past performance as your gauge for how well a stock/fund is going to do in the future. – Every time you read anything about funds you will see the phrase, “Past performance is no guarantee of future results.” This should tell you something.
2. Don’t actively buy and sell, unless you have done major research. – Warren Buffett, who is regarded as one of the most successful investors in the world, has said, “If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.”
3. Don’t buy a stock/fund based solely on what you heard recommended on TV or the radio.
4. Don’t buy stocks or funds if you are concerned about losing money. Jack Bogle, the founder and retired CEO of The Vanguard Group, once said, “If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.”
5. Don’t think you can outsmart the market. Although you may do better than the market from time to time, keep in mind that studies show that professionally managed funds underperform the S&P 500 anywhere from 75% – 96% of the time – and these are the people that get paid hundreds of thousands of dollars a year to invest your money.
The Do’s:
1. Do your research. Research how a company or fund is expected to do, and base your decisions on the future, not the past.
2. Always think long term. Warren Buffett is also famous for saying, “our favorite holding period is forever.” This doesn’t mean that he never sells stocks or funds, but it does mean that when he is purchasing something, he is thinking long term.
3. Be realistic with your expectations.
4. Do realize and understand that you will win some and you will lose some. Another great quote comes from George Ross who once said, “When somebody buys a stock it’s because they think it’s going to go up and the person who sold it to them thinks it’s going to go down. Somebody’s wrong.” You will be right some of the time and you will be wrong some of the time.
If you do would like some more information and learn more about all your options, feel free to contact me anytime.
*The articles and information on this blog are for education and entertainment purposes only and should not be taken as financial or legal advice. I understand that every person’s situation is unique and should be treated as such. Please contact me, or another financial professional, for specific advice regarding your situation. I try my best to keep the information current, but things are always changing, therefore some of the information posted may be different now than when it was first published. If you would like more information about how something listed in any of my posts specifically affects you, please feel free to comment below, email me, or call me anytime.