7 lessons in 30 years of investment

My uncle gave me the first stock on my birthday in May 1995.

Part of Chevron has put me on the path to learning the most effective way to invest in – by doing it yourself.

All books, blog posts, videos, lessons and conversation minds can’t replace the brunt of work and bruises.

A few days ago, I got a call from a young local agent asking me if I wanted him to review my retirement products (I don’t think they would search your name until the cold snorkel room).

The thought of a man in his twenties never experienced the 2008-2009 stock market or the internet bubble that managed my portfolio made me shake my head.

Even experienced currency managers make key mistakes.

I’ve made several mistakes over the years and whenever I sit down to write or make a video, I draw inspiration from success, failure and post-event epiphany.

Here are some things I learned.

1. Stir the water will not boil faster

Frequent money movements won’t accelerate the growth of your wealth. Positive investment does not improve returns.

In my 20s and 30s, I spent a lot of time adjusting my spreadsheets, managing my financial position, and actively buying and selling stocks.

I long to experience the magic of complex interests.

Of course, compound interest is a function of time, not a transaction.

In hindsight, money is a hobby for a profession I don’t like, and it is also a kind of escape.

Frequent money didn’t make me richer, but I still liked it and gained valuable experience.

But constant activity can hurt long-term gains.

2. Market returns are not mediocre

Market earnings are easy to achieve – just buy a fund or ETF that tracks the market, and you’ve done that – a 0.03% reduction in fees.

Very few people actually do this.

Instead, a trillion-dollar industry revolves around trying to surpass the market’s 1% or 2% growth (“Alpha”).

Few professionals have achieved this result.

It is generally believed that the market provides an average return.

But the market is not medium, and market returns do not equal returns from ordinary investors.

The market gets A+, but most investors are B and C students.

The historical S&P 500 has an average long-term return of about 10% when reinvesting dividends.

Over the past few decades, these returns have had a huge impact on wealth.

The longer you invest, the cleaner your portfolio, and you can get great returns by simply investing in the S&P 500 or the total market.

3. Beating the market is not the goal

Too much attention to portfolio management Beat the stock market.

Goals vary by age and need. Sometimes wealth preservation or income generation may be the primary goal rather than the total return.

Effectively, all professional management and DIY personal For a long time, portfolios will not beat the market.

Why?

Reason #1: They don’t buy the “market” and it’s extremely challenging to beat it long term (especially after the expense).

Reason 2: A properly diversified portfolio should hold not only U.S. stocks, but also bonds, international stocks, cash, and possible alternative assets such as precious metals, commodities, real estate, private credit, cryptocurrencies, venture capital or other assets.

Instead of beating the market, you don’t have to focus on diversification to reduce risk and get benchmark returns for every asset class you own.

For example, if your portfolio is 60/30/10 stocks, see – Bondes – cash:

• 60% of your portfolio should track the stock market
• 30% of your portfolio should track the total bond market
• 10% of your portfolio should be tracked High yield savings Rate

So, in a given year, if the stock goes up 10%, the bond goes up 5%, and the cash returns are 4%:

Your expected return will be 7.9% (Not 10%).

=((0.6*0.1)+(0.3*0.05)+(0.1*0.04)) = 0.079 or 7.9%

If you work with a consultant, take an additional 1% off. If they buy a custodial mutual fund, subtract another 0.50-1%.

The complexity beyond this simple example makes measuring results very challenging.

4. Simplicity is important

Complexity is not conducive to DIY investor returns.

More complex portfolios require more investor attention and brainpower.

Time and brain spending in under-managed portfolios hurts our ability to optimize professional or business revenue.

Worse, complex financial portfolios complicate real estate planning and can create unnecessary stress in untimely situations.

But don’t confuse diversity with complexity. The portfolio is both diverse and simple.

Simplicity is not only easy, but is generally more efficient.

Reversing complexity is probably the most difficult task of all.

5. We will guide ourselves

Self-driving cars have arrived. When deployed at a large scale, these cars will be safer than most human drivers.

But, no matter they become safer, most of the population will continue to drive cars manually because they want to maintain control.

This is very similar to DIY investors. We would rather manage our own money than let others do it.

We don’t trust anyone else to manage our money and believe we can do this at a lower cost.

If you are going to do this, educate yourself. Retirement investing is no more complicated than sixth grade mathematics.

Just like learning to drive, time and education can give you the confidence to maintain lifelong control.

6. Consultants are like the most expensive lawn service ever

Most healthy adults are able to maintain the yard. But sometimes we hire lawn care because we don’t want or don’t have the time – to do the job ourselves.

Now imagine that lawn service charges you for grass per leaf.

They make more money when they are fertilized, nourished and controlled weeds to grow thicker grasses.

The service may even grow a species of grass that sprouts the most per square foot, but it looks worse!

Your yard is the same size – only the grass becomes thicker.

And mowed grass? This work has never really changed.

Wouldn’t it make more sense to pay for the service rather than sprouts?

This is the number of financial advisor operations: charges based on the assets (AUM) you manage, even if efforts don’t scale with the size of your portfolio.

Managing a $100,000 portfolio is essentially the same as a $10,000,000 portfolio.

As your assets grow, AUM consultants take more money – they are very good at revoking expenses, so it’s hard to know how much.

The “consistent incentive” to charge AUM is a myth. If true, it will encourage riskier bets and higher returns.

Instead, as the long-term market grows, consultants simply retain wealth and benefit from higher AUM.

Educate yourself and self-manage to save tens of thousands to hundreds of thousands in your investment life. Buy low-cost index funds that track markets or asset benchmarks. Keep it simple.

If you hire a financial advisor, consider them as lawn services – outsourcing the work.

Choose one that charges a fixed fee.

7. Speculative investment is OK

90% to 95% The DIY retirement portfolio should be simple, diversified, and closely related to the benchmark returns.

But we should not be ashamed of “hitting its wealth”, “hitting home runs” or “shooting the moon.”

The biggest wealth creation story in history begins with adventure.

As long as we measure within our capabilities, we can also take investment risks and make money with money (or time).

If you limit your guess to only 5% of your investment assets, you can pursue these hunches, ideas or investment opportunities arising from your expertise, and you will regret that you will not leave retirement.

But don’t guess or throw good money. Develop the edge and stay selective.

Some ideas can be much bigger, but many will fail and can even reduce your overall reward. For some people, the risk is worth it Potential return.

“Rational investment advice” is boring and is often tailored to benefit current people in the industry. This may be why the emergence of cryptocurrency investment is so popular among independent investors and hated by the status quo.