No wait, let me rephrase that. Everyone wants to get rich quickly!
Unfortunately, this is not how investing in financial markets work, especially for main street investors like me and you.
So what is the best investment strategy? The truth is MANY strategies can provide success. However, what is the one constant across every strategy?
The best investment strategy is the one you stick with. As soon as you start deviating from your chosen strategy you lower your odds of success.
This is because investing is HARD. Once you start to deviate from the strategy, you’re opening the door for human emotion to dictate money decisions.
Human emotions do not mix well with logic and reason, especially during inevitable times of panic of euphoria. Determining an investment strategy EARLY on that you can stick with is powerful as your wealth grows.
Even for the young investor, practicing some level of diversification can help create the mindset required to hold onto wealth. Being comfortable with “investing FOMO” — blocking out the noise of what your peers are claiming “their returns” are is essential to maintaining discipline.
At the end of the day, what are we trying to accomplish as investors? We are trying to provide ourselves the flexibility to live our lives the way we want and take care of the people we care about.
With the right planning, practicing an investment strategy that we can stick with will put the odds in our favor.
“The longer you stay disciplined and in the game — the higher your probability of success.”
In my post, “Concentration gets you rich, and diversification keeps you rich” I talk about the different mindsets required to “get rich” versus “stay rich”. With that being said, it’s important to clarify the difference between investing in publicly traded financial markets versus an entrepreneur who is investing in a business they have a material involvement in.
When I talk about the benefits of diversification I’m talking SOLELY about investing in financial markets, because successful entrepreneurs DO play by a different set of rules.
Would Jeff Bezos have been better off investing his life savings into a diversified basket of low-cost index funds instead of concentrating his efforts on Amazon? Of course not. The problem is, not everyone can be Jeff Bezos!
“A successful entrepreneur will always be their best return on investment.”
The majority of us do not have businesses we can continue to reinvest in with expected rates of returns above what financial markets provide. Therefore, if investing in publicly traded financial markets is our main option for preserving and building on the wealth we do accumulate, time plus diversification is always a GOOD option.
“Time + Diversification is always a good investment strategy and good works”
It’s not to say that it is always the BEST strategy, but it is a strategy that has provided investors high probabilities of success for accomplishing their financial goals.
As long as the investor starts investing early enough and has realistic expectations for expected returns — time plus diversification provides the majority of us — who are not going to be the next Jeff Bezos — the opportunity to grow our hard-earned wealth in a process-driven way.
The truth is no matter what your occupation is — if you want to achieve financial freedom at some point in your life — you need an option for preserving (and building) on the wealth you accumulate through your efforts.
Unfortunately, we are not provided the ability to transfer our wealth into the future and maintain it’s purchasing power without any risk. Identifying a process-driven, repeatable strategy is something to strive for even if it’s not the VERY BEST strategy. Finding the “very best” strategy is extremely difficult to identify ahead of time and is not always repeatable.
“What’s the best investment strategy? The one you stick with.”
In that case — time + diversification is always a great option.