Scare Tactic #1: You Don’t Know Enough to D.I.Y.


There are times when I read articles about finance or investing and my mind starts to wander.  I try to stay focused but the articles can sometimes be so complicated and so boring, I can’t help myself.  Or I”ll be reading an article that starts off interesting but gets boring when a so called expert makes a prediction on where the price of oil or stocks will be 6 months from now.   I’m getting pretty good at skipping right over those silly statements.

Despite my concentration limitations and lack of deep, sophisticated knowledge of financial markets, I have been a successful D.I.Y. investor for over 25 years.  How can this be?  We’ll I think Warren Buffett summed it up beautifully when he wrote two things: “There are no bonus points for complicated investments” (Letter to Shareholders 2008) and  “You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” (Letter to Shareholders 1989).

To this I would add “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes”  (Letter to Shareholders 1996).

That’s pretty much all you need to know.  So in practical terms, stick to a simple buy and hold strategy of low cost index funds, make regular purchases of between 6 and 10% of your income for a period of 40 years and you’ll have a wonderful retirement when you reach age 65.

Remember the experts will try to convince you that you don’t know enough and will need their very expensive guidance to successfully invest.  All the research I’ve read convinces me that this will mean less money in your pocket at the end of a your long working career.  Thankfully, there is a easy way to avoid being the sucker.

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