I love to talk about investing with others. I’ve enjoyed it since I was first introduced in high school. Over the years, I’ve made the classic mistakes that most investors make.
I’ve invested in a stock because some random person told me it was going to double overnight. I’ve even invested in a mutual fund because of how well it did the previous year. In both cases, I lost money, not made money.
Eventually I came to a realization. Investing is boring.
You don’t need to spend all of your time researching investments in order to be successful. In fact, it’s the opposite. The less time you spend with investing, the more likely you will see success.
How can this be? It came about when helping a friend out with his investments.
Investing Is Boring
I recently converted a friend of mine to passive investing. Passive investing is when you buy mutual funds and/or ETF’s that mimic indexes, such as the S&P 500. I’ve pointed out the benefits to this approach in my active vs passive post.
We picked out some funds for him to invest in and then I told him that when he has some extra money, he should invest it into these funds, divided up based on the allocation we came up with.
The next thing he needs to do is check up on his investments every six months and if the allocation percentages do not match what we determined in his plan, he should rebalance accordingly.
Finally, I encouraged him to open a free account with Personal Capital. Doing so would allow him to review the fees he is paying on his investments and use their powerful retirement planner to make sure he is on track to meet his goals. That’s it.
He was happy that he finally had a plan and was excited to invest his money. But a few weeks later he called me disappointed that there isn’t any more to investing.
He said that investing is boring. I agreed, telling him it is based on how one looks at it. It is boring if you see that you aren’t actively doing anything else with your investments. You aren’t constantly researching and buying and selling. It isn’t boring when you see the value of your investments rise over time and you reach your financial goals.
You Want Investing To Be Boring
I hear that investing is boring from many people after I tell them about passive investing. I always counter with, wouldn’t you rather spend your free time doing other things, like your hobbies or spending time with your family? I certainly would.
If I had to choose between researching stocks all weekend or going to the beach with my family, I’d choose the beach every time. Who wants to be sitting at a computer all weekend? I already do that all week!
Added to that, knowing that professional money managers only beat the market 20% of the time, why do you, knowing much less about finance and not working in the industry, think you can do better than them? You can’t.
Instead of looking for home runs and putting all of your time and effort into finding the investments that will beat the market by 20% every year, accept the 8% the market has historically returned.
As long as you stay invested for the long term with an investment plan tailored to fit your goals and rebalance your portfolio, you will earn a decent return over time.
Make Investing Boring
To make investing boring for you, put everything on autopilot. Spend some time to determine a plan for yourself. Once you have a plan with the right allocation for you, pick your funds and set up an automatic investment into those funds each month.
Next, make a reminder for yourself to review your portfolio every six months. This can be an Outlook reminder, a sticky note on your computer monitor, whatever.
Every six months you will simply check that your allocations are in line with your plan. If they are off by 5% or more, then rebalance.
Otherwise, forget about your investments for another six months. If you need help with choosing funds, I recommend you read this book. It’s a quick read and will help you to easily get the right allocation from the start.
Now, I realize that for some readers, this sounds intimidating. It’s always scary to do something for the first time. Many times, we spend all of our energy trying to get things perfect that we never even start investing.
For these readers, I highly encourage you use Betterment. With Betterment, you answer a few questions to get your asset allocation and set up a recurring transfer of money to you new Betterment account. That’s it.
From there, Betterment will invest your money each month, rebalance your portfolio and more. They take a small fee for this, but it is more than worth it if the other option is you not investing in the first place. You can click here to open your account, or click here to learn more.
After you start, regardless if you decide to go on your own or use Betterment, you should open a free account with Personal Capital so you can track your investments and your money in general.
With all of your information in one place, you can use the retirement planner Personal Capital offers and see if you are on track with your goals and make any changes you may need to. You can learn more about everything Personal Capital offers here.
At the end of the day, investing is boring. It doesn’t have to be something that consumes all of your time. You don’t have to have a second career as an investor if you want to grow your money.
By simply investing in the market passively and earning what the market returns, you will grow your wealth and be more successful than if you try to actively beat the market.
So stop wasting your time trying to find the next hot stock. Just invest passively and enjoy the ride.