Reply to Give me your best monetary advice

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[quote=Anonymous][quote=Anonymous]11:36 I think I have seen your posts before, and they get a little tiresome.  Do I agree that some people can make a killing investing in stocks? Yes. Do I think that is a reasonable or sensible goal for me, or you, or 99% of the people reading this board? No.

It is true there are always some individual stocks that will do better than the market, just like there are some that will do worse.  The question is how do you know which you are buying?  Your "innate sense"?

The fact is that index funds outperform 80% or more of managed funds.  Which means that index funds are doing better than people who are spending all day every day trying to pick stocks, with the research resources of enormous corporations backing them.  That's good enough for me.

[/quote]

Great - good for you, perhaps 5% annual gains half of which is eaten up by inflation and management costs are fine you, but not for those seeking the best monetary advice. Matching the market is easy - just buy the market if that's all you are seeking. However, for those who want to acquire significant wealth via the stock market they need to be individual investors themselves. As I've said repeatedly, if individuals are not interested in being knowledgeable about the economy and the goods people are purchasing then buying Index Funds is a better option than placing ones hard earned money in their mattresses.

However, without too much effort individuals can invest in well established corporations that pay 3-5% annual dividends, enjoy the benefit of compounding by reinvesting those dividends, and on top of that increasing their wealth through equity price appreciation over a period of years. So using that simple method of growing ones wealth without paying management fees, individuals can easily beat the indexes.

But, the most important thing individuals gain by managing their own money is KNOWLEDGE.  Passive investors never see the opportunities that arise in the stock market because they are detached from it.  Own stocks, collect dividends, watch the stock market, and occasionally when you see the price of stock in good companies get crushed for irrational reasons be a Contrarian and buy shares in those companies at bargain basement prices. Then wait for perhaps a year or two to sell them when they return to their normal price levels.

These skills will make you wealthy and they will be skills you'll be able to teach your children. You can never really win the BIG prizes unless really enter the BIG games.

Good luck - you can do this!

I'm out!!![/quote]

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