Bert worked for one of the large Detroit automobile companies for many years and had a retirement plan with some very expensive no-load investment options. Every Monday, Bert checked in with his office peers and then adjusted his employer’s retirement account, moving his investment allocations according to what the market did the week before and what his peers projected the market would do in the future.
Bert was his own worst enemy! He listened to his peers and moved his retirement money frequently. That was, until he attended Free Market classes. There he learned that each time you change your portfolio, your investment’s highest risk cycle starts all over again. Each time Bert changed his retirement account, he was actually starting a new twenty-year risk cycle.
Predictions and forecasts don’t work. If your portfolio strategy needs a forecast to work, it is already flawed. Resist the feeling that you should “do something” when the market changes. Don’t listen to and don’t believe the hype. Most of all, don’t panic, but remember the basics we have taught you!
- Each time your money moves in and out and between mutual funds, it costs you. It is next to impossible to make up the huge costs of the buys and sells—called turnover—and other hidden costs in investment returns. Your diversification also suffers when you move your money, as your account takes on higher risks, which result in lower returns.
- It is so very important to become prudently diversified and then just stop moving your money. The longer your globally diversified portfolio stays continually and prudently invested and doesn’t trade—except to rebalance—the better your returns can be and the lower your investment risk.
- Teach your heirs so you and they all gain the knowledge needed to maintain the necessary discipline and avoid any future investing mistakes. This will help you have an abundant and stress-free life. Be patient, be at peace, and be wise.
- Time is your friend. Free Market investing is a lifetime strategy. Stay committed to being disciplined and teaching your loved ones to also stay disciplined. Successful investors stay the course once they are broadly diversified, because over time, risk is reduced, expenses are reduced, and returns potentially increase due to lower costs. After twenty years of holding the same portfolio, a prudent portfolio’s market risk is almost eliminated.
The Free Market philosophy might be the last investment change you and your descendants will ever need to make. Not just you, but also your children, their children, and your grandchildren’s heirs. Get the idea: It’s for long-term investing—to the end of time!
“He who ignores discipline comes to poverty and shame, but whoever heeds correction is honored. A longing fulfilled is sweet to the soul, but fools detest turning from evil. He who walks with the wise grows wise, but a companion of fools suffers harm.” (Proverbs 13:18-20)
Written by: Maria J. Wordhouse Kuitula and Phyllis J. Veltman Wordhouse, free market wealth and stewardship coaches, co-authored the book Stress-Free Investing, available at Amazon.com. Maria is the president of Wordhouse Wealth Coaching and may be reached at 616-460-6518 or [email protected]. For QUESTION LISTS and INVESTOR EDUCATION VIDEOS, go to www.WordhouseWealthCoaching.com. © Wordhouse Kuitula 2013. Photo: stock.xchng