You don’t know what stocks to buy!
A simple selection criteria,
“I’ll just buy those stocks that are big and well known that have excellent prospects for the future”
Here are the stocks you would have purchased in 1987; 30+ years ago when you first started investing for retirement. these stocks were included in the Dow Jones Industrial stock index, they were the biggest and the best at that time.
Here are the stocks you would purchase in 2018 if you were using the same criteria as you used in 1987.
After 30 years (the time IFR suggests as the stock accumulation period), only 12 of the original 30 stocks remain in the list.
Point: you didn’t know what stocks to pick in 1987 and you don’t know what stocks to pick in this year either.
As of this date 3/21/2018:
General Electric, a stalwart in many portfolios, and in the original 30 stocks of the 1985 Dow Jones averages, is in financial trouble and has lost half its value in the last year.
What Would Have Prevented YOU From Buying ….
Owning individual stocks is a pain in the ass!
- Finding the time (and knowledge needed) to do stock analysis
- Knowing what types of stocks to buy
- Knowing what stocks to buy
- Avoiding getting into a stock “too late”
- Inability to purchase partial shares – important when the price of a stock is more than you want to invest each month.
- Exposure to unknown (to you) dangers known only to insiders (Enron)
- Overnight price declines due to …. you name it.
- trying to guess when the market will rebound or sink
- PLUS, the ever-present uncertainty surrounding knowing when to sell
From 1955 to 2016, the stock market (i.e., S&P 500) has enjoyed a very healthy annualized investment return of over 10%, yet 88% of the Fortune 500 firms from 1955 are no longer in existence! In 1955, what would have kept you from investing in one of the 440 firms of 1955 that are no longer in existence?
In 2018, what is there to keep you from investing in one of the 440 companies that will no longer be in business 60 years from now?
Here’s What To Do
Instead of a plan that includes individual stocks, plan on purchasing only baskets of stocks (Mutual funds, ETFs, etc).
You harvest market returns for your retirement portfolio by investing in the entire market and being exposed to the aggregate market risk, not by trying to guess the winning company of the bunch. There are simply too many factors out of your control to consistently determine that.
You need to create a retirement investment portfolio that rewards you for taking the market risk that capitalism compensates you for.
Plan on following the advice presented on this website, Investing For Retirement to the letter. You will avoid all the aforementioned pains.
The plan presented on this website is a “set and forget” plan. Once initiated, the plan will require no decisions or time or energy or sleepless nights. In spite of what professional “financial advisors” may sell you, there are “set and forget” plans and this plan is one.
Think about it for a minute. If Financial Advisors presented you with a set and forget plan, then you wouldn’t need them, would you? See?
Here’s Why “What To Do” is what to do
All of the above pains are removed.
Out of all the possible combinations of decisions and actions you could take, following the advice presented herein will result in the biggest pot of money possible for you at the end of your investment horizon. GUARANTEED!