In my 29 years of managing OPM (other people’s money) I
learned a lot about human nature, including a few motivational attitudes that I
believe are harmful. Today I’ll mention just one example:
• I’m scared to death
of the stock market. I keep my money in bank savings accounts, certificates of
deposit, and annuity contracts.
That attitude suggests to me that you’re blind to the
biggest thief of all: inflation. It has averaged 4.1% yearly since World
War II, ranging from very high to very low.
Going forward, no one can know what the rate of inflation
will be, so for planning purposes 4.1% is a defensible working number. As such,
your various forms of savings are unlikely to add real money (purchasing power)
until your net gains (after fees and commissions) exceed 4.1% annually.
To get that much just now, you pretty much need to put your
life savings into well-selected
stocks, no-load mutual funds,
and/or ETFs (exchange-traded funds). And
perhaps MLPs,
preferred stocks, and laddered
bonds when interest rates start trending upward.
If that’s what you’d do, vow to become a knowledgeable do-it-yourself portfolio manager. You can do so free of
cost with small bites like the posts in my blog. In time, you’ll begin to feel
comfortable expanding your interest into the DIY resources I mention. Also:
Get real. Every
bit of your life and mine is driven by guesses about what the future may hold.
Every bit. No one can know the
future, so we need to make educated guesses. Those can be driven nicely by the
Internet and you.
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