My thoughts on investing may or may not help you. I don’t claim to be a financial expert and I would never give anyone else investment advice. So, with that in mind, here they are.

First, invest in yourself

Education is key. Even after you leave formal education settings, read, learn from others who can teach you. Better yourself. Invest in your health. Eat right, listen to your doctors and exercise. It doesn’t do you any good to make money if you can’t enjoy it. Warren Buffet said “You only get one mind and one body. And it’s got to last a lifetime.”

Time is key

Warren Buffet said “No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.” Buffet also said “If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.” There’s really no substitute for patience and allowing time to compound growth. I buy to hold stocks, not trade them. I’m looking at a minimum 10 to 12 year horizon. I invest like I will never need the money. If you have a short-term mindset then I suggest buying lottery tickets.

Balance

Don’t put all of your eggs in one basket. I recently read something published by Motley Fool saying that if you invested $5,000 in Nvida 20 years ago, it would be worth more than $2,000,000 today. If you guess right, then you could make a killing. If you guess wrong, you might have done better at a casino card table. Balance allows you to mitigate the effects of bad choices – not necessarily your bad choices, but those made by the companies you invest in. David E. Hultstrom, a wealth management professional I highly respect, recently said:

The fastest way to huge losses (and gains!) is one big, concentrated bet. Employer stock, when that employer has been phenomenally successful and the stock price has increased commensurately, is where this frequently arises. (See Enron.) While you can’t generally get higher returns without taking risk, you are not rewarded with higher expected returns from taking risk that is diversifiable. In other words, the expected return from owning one stock in the S&P 500 is not higher than the expected return from owning all the stocks in the S&P 500, but the risk is absolutely higher. The more subtle version of this mistake is making seemingly different bets (investments) without realizing how correlated they are. Owning many different tech stocks in the late 1990s, several rental houses in 2008, and a variety of AI and semiconductor stocks now is not diversification.

Avoid Consumer Debt

There is nothing wrong with “reasonable” business debt, but avoid paying high interest rates on consumables. Good debt is money spent on something that will (not maybe) generate income to pay off the debt and then continue generating income. For example, if you can get a reasonable loan to purchase a reasonably priced rental property that will pay for itself and then continue generating income, that’s good debt. Bad debt is anything that potentially puts your back against the wall if things don’t line up the way you hope they do. The same scenario mentioned above could quickly turn good debt into bad debt if your liquidity is such that you could not cover a mortgage payment while the rental home is vacant. Regarding liquidity, Hultstrom says:

Money is life’s Swiss Army knife, and you can be solvent (assets greater than liabilities) but still go bankrupt (or suffer ruinous losses) trying to sell illiquid assets in a crisis. To use another analogy, money is like oxygen – you don’t really notice it until it isn’t there and then it’s all that matters.

He also says you should never leave yourself no margin for error. What would happen if you lost your job, you became disabled or or the engine fell out of your vehicle?

Pay Attention

Pay attention to the news, but don’t believe everything you hear. Another Buffet saying is “Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.” Also, don’t allow fear to drive your decisions. A few years back (during the Bush Presidency), there was a market downturn and many people abandoned ship. They got out of the market and locked in their losses. Those with the foresight to hang in there saw their investments recover and grow.

Have a Plan and Get Help

If you have no plan, you still have a plan. It’s called letting the chips fall where they may. A plan should consider where you are, where you want to be and how you will get there. As part of this process you should acknowledge that you don’t know what you don’t know, so getting help from a financial professional makes sense. Most people use a Certified Financial Planner. If any of our wealthier readers meet their new client criteria, we highly recommend Financial Architects or the Synovus Family Office.