Investment made simple
I’ve been interested in investing for at least 10 years, since I first had something to invest. During that time, I’ve cycled through several investment strategies, from investing heavily in the tech sector in 1999 (great idea!) to holding 25 or so stocks, roughly diversified by sector, to index funds.
Sometimes, investing seems hard. What strategy should you pick? How can you maximize your returns? Who do you listen to? What stocks will outperform?
The fact is: investment shouldn’t be hard, and the best approach to investing is actually exceedingly simple. What is this approach?
1. Determine a reasonable asset allocation.
2. Buy low-cost index funds to match this allocation.
3. Rebalance periodically to your original asset allocation.
This approach is backed by Nobel-prize-winning economists, not brokers asking for your money. Over time, it performs better than most other approaches. And it requires minimal time and minimal expertise.
Of course, there’s more to financial health than this, like keeping cash reserves and staying out of debt. But when it comes to your long-term investments, those three steps should be your basic blueprint.
Delving a little deeper: what is a reasonable asset allocation? Start by checking out this writeup. And check this space for more over time.
