Be a Tortoise on a smooth uphill road. It is that simple. There are TWO main components to this plan.
Component 1: Read and Apply the lesson from the age-old “Tortoise and Hare” story. Travel to your financial goals slow and steady like the “Tortoise”. Invest regularly and consistently. Just keep plugging along even when it seems there is no progress forward. Even saving $100 / month is forward movement. Once you stop, it is like getting up from the couch after a nap – it is hard to get going again. The Hare figures he can speed up and catch up to the Tortoise at any time.
Playing financial catch-up at age 55 (a.k.a. being a “Hare”) is like going on a binge-diet before Christmas. Not only are you at risk of not sticking with it but you are also more tempted to go for big growth, which can start looking a lot more like gambling than investing. The problem of course is that younger people think they won’t ever get old or at least not for a really long time. This is the only time that they will be young, so they should enjoy it. It is far more common that people wish they saved more when they were younger rather than wish they spent more when they were younger.
Component 2: Continually do “Statistics”. Travel on a smooth road instead of excessively steep up/downhill, jagged roads. The goal of diversification is to smooth out the road. Invest in different types of companies, who do different types of things, in different places, with different strengths/weaknesses. This may mean fewer jumps up but may also mean fewer plummets down. The Hare may end up running twice as far as the Tortoise and still end up at the same finish line at the same time. Going slow and steady on a smooth road does not necessarily mean you will end up behind. The more volatile the investment, the more gain and the more loss potential. A single stock may pay off well or the company may fold and it will be worth nothing. It becomes more of a gamble, and potentially bumpy road. Sample. Be invested in many different things that have different trends to help smooth out the road.
By Cammie Humke, Registered Representative at The Humke Group, Inc
Located at 555 S. Randall Rd in St. Charles, IL, phone 630-377-7133
The Humke Group, Inc is an independent firm with securities offered through Summit Brokerage Services, Inc. Member of FINRA/SIPC. Opinions expressed are that of the author and are not endorsed by the named broker/dealer.