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Lesson 10 - Final Thoughts

Lesson 10 - Final Thoughts

This brings us to the end of the beginner investor series. We've laughed (hopefully), we've learned a few things, and hopefully we aren't overconfident because this is only meant as an introduction. If you are truly interested in investing on your own, I would highly encourage you to spend much more time on resources such as this site or a trusted advisor (I know a guy :) ) before diving in headfirst. I have been investing for over 13 years and am still learning new things as the investing landscape is constantly evolving. Here are a few last thoughts that I wanted to pass along.

Prioritize Time In Market Vs Timing The Market

A popular adage in investing is "buy low, sell high." Sure, I will go ahead and do that. While I am at it I will just go buy a lottery ticket and be sure to only pick the correct numbers. Analogy time! If I were to ask you what time you would make it to work tomorrow, you could likely give me an answer that would be extremely close, right? What if you had car trouble? What if there was a snowstorm? What if your kid decides 5 minutes before you leave is a great time to spill paint on a new outfit that you just bought for them (one of those may have recently happened to me)? The point is that it is difficult to predict the future. Investing is no different. 

So rather than trying to decide if the market is at a high point or a low point, there is another option; dollar cost averaging.  This is where you decide on a set amount of money to invest at a certain time interval (weekly, monthly, etc) and continue to invest it regardless of what the market is doing. This has several advantages. One is that you buy more of a fund when it is low and less when it is high, thereby getting the most value for your money. 

Another benefit is that you can potentially lessen the effects of a down market. Markets tend to gradually go down rather than drop straight off, though not always. By dollar cost averaging, you invest at different points in time so you run less risk of buying too much at any certain point. 

Dollar cost averaging is by no means perfect and some astute investors will argue that lump sum investing (investing a large sum of money at one time) has better returns and in some cases that may be the case. Do your research and decide what strategy fits your personality and situation best. 

Investor Behavior

If there was a survey sent out asking, "what is the number one factor that separates successful investors from unsuccessful ones?" What do you think the top answer would be? My guess would be something around picking the right stocks or being in the right funds. My experience has been that it is investor behavior. Being able to stick with a plan when times get tough. Warrent Buffet famously said, "be fearful when others are greedy and greedy when others are fearful." It is tough to be optimistic when markets are down and every last news outlet is talking about a potential financial apocalypse. These situations in the past have been when opportunistic investors have made huge sums of gains. 

Be cognizant of your feelings but don't let you affect your decision making. We aren't robots, I get it. When markets are down, fear is a constant in any investor's mind. Be sure to listen to the logical part of your brain as well. 

Thank you for reading through this series and watching my videos. I will continue to provide more educational resources in videos and my blog as long as I have the time to do so. Please reach out to me with any questions or if you are interested in taking things to the next level by becoming a client. I wish you the best of luck!