The Simplest Guide to Investing Your Personal Money Without Thinking.
Tldr: I have read everything on building personal wealth and tried many things. I have come back to simple. This should help you save yourself from the thing that will harm you the most – your own emotions.
Do you know that the best performing funds in Fidelity are from dead people and people who’ve forgotten their accounts….?
The temptation to meddle is the biggest thing that will hit your returns.
We are gullible emotional monkeys who are hardwired to be bad investors. We sell at market bottoms when we should be buying, we buy ‘tips’ from ‘experts’ and change our minds a few moths later …I could go on.
I have looked at every single strategy and come back to simple. Occam’s razor. So…firstly, here are the basics on how to be wealthy without thinking.
- Make this your base plan
- Be tax efficient
- This is the most important bit. Download and inhale this book by Meb faber. Then get a diversified asset allocation, rebalance once year, and stick to the strategy forever.
The book is gold because it shows — using historical data — that ALMOST ANY global asset allocation over a long enough timeframe performs the same – only 1% between them. Just choose one of them. If you want even more social proof, then this list of other people’s portfolios is also useful .
So far so easy. But your emotions will make it hard. Doing the below will keep you sane and stop doing stupid things:
- Have the right expectations
Get comfortable with current forwards returns so you have realistic expectations. Most people think they can make 10% a year. Current markets have about 4% real baked in (after fees and taxes).
Make sure your timeline matches your allocation.
2. Write an investment plan to know what you will do when markets tank. Benchmarks help enormously here. Know what markets have historically returned and what the worst drawdowns have been, and therefore what you would accept before selling m.
Most of all – resist trying to be clever. Most smart people are awful investors because they are smart and think they have superior insight.
Markets are a complex system played by a mix of interdependent actors with different goals and timeframes. Are you going to beat Ray Dalio with his armies obsessing about the markets?
We like to gamble, we like to believe we have superior insight.
We don’t .
The most successful investors are only right c.60% of the time. We simply don’t have the visibility of bandwith for all the variables acting on people’s decisions.
Start the journey. Keep waking.
God speed ;)