{"id":361,"date":"2021-04-28T14:47:29","date_gmt":"2021-04-28T14:47:29","guid":{"rendered":"https:\/\/tfolifeacademy.com\/tfofamilyoffice\/?post_type=tool_resource&p=361"},"modified":"2023-08-21T14:47:47","modified_gmt":"2023-08-21T14:47:47","slug":"keep-investing-simple-but-smart","status":"publish","type":"tool_resource","link":"https:\/\/tfolifeacademy.com\/tfofamilyoffice\/resource\/keep-investing-simple-but-smart\/","title":{"rendered":"Keep Investing Simple but Smart"},"content":{"rendered":"

[vc_row][vc_column][vc_column_text]<\/p>\n

KISS \u2014 Keep Investing Simple but Smart<\/strong><\/h3>\n

Investors young and old often perceive investing to be a complex, intimidating, activity. During the first decade or so of my career, I too thought of investing as an intricate mosaic of math, statistics, and economics. But the more experience I\u2019ve gained, the more I\u2019ve come to realize that investing is a little bit like health and nutrition:\u00a0 Following a few straightforward, evergreen principles can go a long way to having a successful experience.<\/p>\n

Know your \u201cwhy\u201d<\/strong><\/h6>\n

There\u2019s a great quote from the children\u2019s book Alice in Wonderland that I think fits successful investing perfectly:\u00a0 I\u2019ll paraphrase it as \u201cIf you don\u2019t know where you\u2019re going, any road will do\u201d. The single most important driver of a successful investment experience is understanding \u201cwhy\u201d you\u2019re investing. Having some clarity about what you might want to eventually use the money for, and when that might take place, is a great first step. Even if it\u2019s as simple as deciding whether the money you\u2019re investing is for a new car three years from now or for a \u201crainy day\u201d 10 years from now is really important. If you think you\u2019ll need the money in three years, and you don\u2019t have other sources of funds to draw from for the car, you\u2019ll likely want to be fairly conservative in how you invest. On the other hand, if you\u2019re investing for an unknown expense 10+ years from now, you might be able to take more (but smart) risks because you have time to recover from any short-term gyrations in the financial markets. In my experience, many people want to start the investment conversation with \u201cwhat should I buy\u201d when they haven\u2019t answered the question of \u201cwhat\u2019s it for?\u201d<\/p>\n

Diversify<\/strong><\/h6>\n

We\u2019ve all heard the phrase \u201cdon\u2019t put all of your eggs in one basket\u201d. I think it\u2019s an incredibly wise and important piece of wisdom in investing. Many investors want to believe that they, or the investment managers they hire, can foretell the future. But whether we are talking about the short-term direction of the stock market or the performance of an individual company, we should all acknowledge that the future is unknowable to everyone. That\u2019s why I believe diversification is so important. If you own hundreds or thousands of companies from around the world, you get two important benefits:\u00a0 First you won\u2019t be risking your future lifestyle on the performance of just a small set of stocks, when we know from history that sometimes the most glamourous stocks at a given point in time turn out to be losers in the future. Second, the more different stocks you own, the higher the likelihood that you\u2019ll have some of your money invested in the \u201cbig winners\u201d of the next decade, even though today none of us know who the \u201cnext Amazon\u201d is going to be.<\/p>\n

Keep costs low<\/strong><\/h6>\n

One of the most unfortunate facts about the investment process is how difficult it can be for everyday investors to find accurate information about the costs of investing. For decades, the financial services industry has often opaquely embedded important information about costs in 100+-page documents, hoping that investors won\u2019t have the patience to look for it. Yet, costs are incredibly important to a successful investment program. Every dollar we as investors pay in fees to investment managers or mutual funds is one less dollar we have working for us in the financial markets. While a few tenths of one percent might not seem like much, when you take the dollars you\u2019re investing and compound that annual percentage over the years or decades you plan to hold the investment, you can end up losing a material amount of wealth in fees. To make matters worse, the phrase \u201cyou get what you pay for\u201d does not apply to the world of investing. There is no evidence that mutual funds or investment managers with high fees earn higher returns for their clients. In fact, the reverse is true. Always make a point to understand the fees of any investment you are making and try to determine if lower cost options are available.<\/p>\n

Behave<\/strong><\/h6>\n

Earlier in my career investing seemed to be all about cold-hard numbers and data, but I\u2019ve since learned that, like most things in life, emotions play a huge role. The investment journeys we take during our lifetimes will be filled with alternating periods of fear and greed, and the best investment plan in the world won\u2019t help us as investors if we can\u2019t stick with it. We are human; no one enjoys seeing the value of their wealth decline and not knowing when it might recover. Similarly, it\u2019s natural to feel some degree of FOMO and want more when we hear stories of those around us (physically, or digitally) doing well. But letting those emotions drive our actions can easily lead us to poor investment decisions. When markets decline, we will feel like selling to \u201cstop the bleeding\u201d and when markets have done well for a period of years, we will be tempted to take big risks. Far too many investors don\u2019t think about these dangerous realities in advance and develop plans to manage them. A few simple techniques, such as looking at your account values less frequently, making a pact with yourself to always allow a five-day \u201ccooling off\u201d window before making any investment decisions and talking with a trusted advisor (professional or not) who knows your specific goals and circumstances can go a long way to making investing a less emotional, and hopefully more successful, activity.<\/p>\n

While investing can be an incredibly deep and complex process, I think 90% of a successful investment experience can be found in the combination of knowing your purpose, acknowledging that the future is unknown, paying attention to costs, and not being taken \u201coff course\u201d by what\u2019s going on around you. That being said, just because those things seem simple doesn\u2019t make them easy. World-class athletes and musicians who have practiced for decades still have coaches to help them stay focused on what\u2019s important and having a financial coach can serve the same purpose.[\/vc_column_text][\/vc_column][\/vc_row]<\/p>\n<\/section>","protected":false},"excerpt":{"rendered":"

Chuck Carroll, TFO Family Office Partners’ Chief Investment Officer, describes why effective investing isn\u2019t as complicated or intimidating as it might seem. Simple actions like understanding your purpose, diversifying, controlling your costs, and managing your behavior can go a long way toward creating a successful investment experience.<\/p>\n","protected":false},"featured_media":358,"template":"","resource_category":[12],"acf":[],"yoast_head":"\nKeep Investing Simple but Smart - TFO Life Academy<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/tfolifeacademy.com\/tfofamilyoffice\/resource\/keep-investing-simple-but-smart\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Keep Investing Simple but Smart - TFO Life Academy\" \/>\n<meta property=\"og:description\" content=\"Chuck Carroll, TFO Family Office Partners' Chief Investment Officer, describes why effective investing isn\u2019t as complicated or intimidating as it might seem. 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