“Let’s do it!” I told my friend almost immediately. His proposal? We’d both set up a fake investment portfolio, track it once a week, and see who ended up “earning more money” in the end. That was about the last time I was really interested in investing…and that was 13 years ago. In fact, even now as I’m a decently well-known financial blogger, I can honestly say that I hate investing. It’s even challenging for me to write this article because I know I’m going to have to talk about stocks and bonds and blah blah blah…!!
…Seriously, I just had to step away from my computer and go for a coffee break…
Alright…let’s dig in…if we must.
My Name is Derek…I’m a PF Blogger, and I Hate Investing
Creating that mock investment account sounded awesome. Want to know why? Because I just knew all of my picks were going to skyrocket and I was going to kick my friend’s butt.
- I was 20 years old and extremely confident in my ability to predict the financial future (…at that point, all of my education had been in engineering…so that made total sense…(eye roll…),
- I was arrogant (obviously) and wasn’t afraid to tell my friend that he didn’t stand a chance against my superior intellect,
- And I couldn’t wait to prove myself and start investing my own money (you know…once I actually had some after getting through college and scoring my first job)
So…here’s what really happened
We tracked those stocks for about three months. Neither of us really made any money (at most, we earned 1% on our investments). And then the boredom of it all caused us both to forget all about our friendly competition.
Five years later, I found that mock Yahoo investment account. I wish I could tell you that my fake $100,000 turned into $1,000,000…but alas, it did not. (All that arrogance for nothing! ;)) Instead, many of the companies I chose to invest in were either bought out, went bankrupt, or changed names and ticker symbols. All in all, it looked like I had either earned nothing or even lost a bit of money over the years. Either way, the whole thing was too convoluted and would have taken hours to sort out. It just wasn’t worth the effort or the time.
Long story short, I didn’t beat the market and neither did my friend.
But, through this experience and via many others that I’ve had throughout my 20’s and 30’s, even while I’ve shyly proclaimed to hate investing, I’ve discovered three main things about it that I think everyone should take note of:
1) No One Has Any Fricken Idea What the Market Will Do
You know when you’re flipping through the channels and you come across CNN or CNBC financial news? They’re typically talking about a particular company or sector and all of the tailwinds or headwinds that they have in front of them…and therefore you should either stay far away from that stock or invest immediately.
I used to love these shows…until I realized they had absolutely no idea what they were talking about.
I mean…don’t get me wrong. All of these people are obviously well-educated and always have pretty solid reasoning around why they believe what they believe about the stock or the particular segment of the market. But, just like with my fake portfolio, rarely do things turn out as you expect them to. And the talking heads on TV are no different. They can make all the proclamations they want, but rarely do they go back to see if what they said would happen actually did…
Thankfully, other interested parties do just that.
A few years ago, MarketWatch explored the accuracy of Jim Cramer, a well-known investor and TV host of Mad Money. Cramer has been selling his stock picks via a subscription service for years, and guess what? Over that span of time, the simple S&P Index Fund actually outperformed Cramer by nearly 2X!
Research credit: The Wharton School
All that time and energy buying, selling, listening, watching, learning, buying, selling, etc. etc…. and you would have been better off ignoring the market entirely and investing in the S&P 500…
Sorry talking heads. It’s pretty clear that I hate investing…at least active investing… and I don’t watch you anymore.
2) Investing is a Necessary Evil
While I might hate investing, I’m smart enough to realize that without it, I’ll never hit my financial goals.
Here’s what I mean:
Let’s say that I…
- save $500 a month for the rest of my working career (which is certainly nothing to sneeze at!)
- Since I hate investing, I’m just going to stash it under my mattress and earn no interest
- I’m 33 years old now, how much do you think I’ll have when I turn 68?
Five hundred bucks a month becomes $6,000 a year. I’ve got 35 years till I’ll likely retire…so that equates to….$210,000.
Hmm, not terrible, but not great, especially when you consider that everything will be twice as expensive at that point (thanks inflation…). So…the $30,000 that it takes us to live today will actually cost $60,000 in the future. That $210,000 will last 3.5 years…and then I’ll be broke at age 71.
If, however, I would have invested that $500 a month into an S&P 500 Index Fund…my $210,000 would actually have become $1.4 million! Dang! By investing, my retirement nest egg will last for decades. So even though I hate investing, I realize that putting money into the market will likely have a far better result than if I simply stuff it under my mattress.
3) Even If You Hate Investing, It Can Still Be Fun
I hate investing because of the talking heads, the know-it-alls, and the time it takes to manage a portfolio. But you know what makes investing fun?
Liz and I have worked our butts off (ie. we paid off all our debts and continue to live far below our means) and stashed quite a bit of cash into our retirement accounts. Today, we have roughly $125,000 stashed away, earning interest.
If we did absolutely nothing more than sit on this money and let it continue to grow, we’d have $2.5 million by the time we reach 68 years old.
Yeah, I’m having fun now.
And, the beautiful thing is, I spend pretty much zero time each year managing the accounts. Here’s how we do it.
I invest in my 401k every two weeks via my paycheck. Through the benefits department at my work, I was able to set up an auto-withdrawal from my paycheck. Since I never physically see the money transfer (it leaves my check before I even get it), I never miss it.
Low-cost Mutual Funds and Index Funds
I invest in simple stuff that is low-cost and has a great history of returns.
- 50% of my investing is in index funds that model the S&P 500
- 17% is in a target fund that will adjust the mix itself as I get older
- The remaining 33% is invested among four other funds to round out my portfolio with the high returns of small company stock, the safe returns of boring bonds, and a splash of foreign investments in case the U.S. market goes belly up.
This is what my investment picture has looked like for 3+ years…
And, since I was in my portfolio to take the above screenshot, I figured I may as well look at my returns over the year…+17%! Nice! I’ll take that!
Within your 401k, you probably have the option to check a box that says, “automatic re-allocations?”. I recommend you check the box.
Simply put…because what goes up must come down.
If you invest 50% of your money into stocks and 50% into bonds, but stocks do amazingly well this year, your portfolio value might actually result in 60% stocks and 40% bonds. By reallocating your investments, you’re essentially telling your 401k firm to sell off some stocks at the high price to buy some more bonds at their low price (ie. selling high and buying low). Then what is likely to happen?
- Bonds do well and stocks do poorly,
- you lose less (since you sold off some stocks), and
- you earned more (since you bought up some bonds).
The beauty of all this is that I never have to think about it. I checked the box and I know I’m earning more money because of it. Done.
Related: Where Is Your Money REALLY Invested? Do You Know??
If You Hate Investing, Good For You. You’ll Likely Be Crazy Successful.
I love making money, but I hate investing. Therefore, I automate as much as possible. And you know what? I believe I’m more successful for it.
An active stock investor (ie. someone who continually tries to time the market and frequently buys and sells company shares) earns approximately 4% a year. Why so low? Because they still believe they know what will happen in the market from day to day. That’s foolish. And, on top of this, they pay ridiculous fees – largely fund management fees and transactional fees.
A passive investor typically fairs far better. They do less (because they’re wise enough to know that the market cannot be timed) and actually earn far more – more than double according to the recent analysis by NerdWallet.
If you hate investing, but decide to passively invest vs. doing nothing, congratulations! You’re likely to be a huge financial success!
How about you? Do you hate investing? Are you ready to invest passively and reap the likely rewards?
If you’re a little more nerdy than me and want to know more about your investments (ie. how much you’re earning and how the funds are allocated), I recommend Personal Capital. It’s free and basically Mint on steroids.
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