Investing is for people who have time.
Not time to devote to cherry-picking their investments, buying and selling shares every day, and obsessively checking their return like they check their Twitter feed — time to leave the money alone.
The markets will rise and fall, and you can’t predict what they will do next.
How do you defend against that?
According to many financial experts, you spread your money out (“diversify,” in investing-speak) and, instead of aiming to beat the market this year, aim to ultimately gain rather than lose over time.
When life coach and author of “MONEY Master The Game: 7 Simple Steps To Financial Freedom” Tony Robbins demystified the nine biggest myths of investing on Business Insider, he highlighted “beating the market” as one of those myths. Specifically, that it can be problematic to invest with fund managers who claim they can do it.
“From 1984 to 1998 — a full 15 years — only eight out of 200 fund managers beat the Vanguard 500 Index,” Robbins writes. Instead, he says it’s wiser to invest your money in a diversified, low-cost index fund.
So instead of buying all the stocks individually, or trying to pick the next high-flying hotshot fund manager, you can diversify and own a piece of all 500 top stocks simply by investing in a low-cost index fund that tracks or mimics the index.
One single investment buys you a piece of the strength of “American Capitalism.” In a way, you are buying into the fact that over the past hundred years, the top tier companies have always shown incredible resilience.
Robbins isn’t the only one who recommends this approach. Online investing platforms known as robo-advisers tend to invest in index funds and their exchange-traded counterpart ETFs for just this reason.
Plus, Robbins provides a very apt quote from investing legend Warren Buffett’s 2013 Berkshire Hathaway shareholder letter: “The goal of the nonprofessional should not be to pick winners — neither he nor his ‘helpers’ can do that — but should rather be to own a cross section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal.”