What would you say if I told you that you could beat the returns of 93% of all investors, and that you could do it with 15 minutes of work, once a year? If you’re a reasonable person, you would probably scoff at the idea. And you should scoff, because claims like this are almost always false or misleading. But what if it were true?
Most of these types of claims are based on systems that involve market timing, performance chasing, or following the latest hot stock-picker or newsletter service. While it’s true that some of these systems can produce spectacular returns in the short run, the big flaw is that you never know when that hot hand is going to cool off. And they all cool off eventually.
What if you could set up an investment portfolio that had only three investments in it, and you could forget about the stock market until the end of each year when you reviewed your performance and rebalanced it if it were necessary? It’s not only possible – it’s being done every day, and it beats 96% of all other investors, both amateurs and professionals. How is this possible?
There are three keys to this simple yet powerful approach. The first is the availability of low-cost funds called ETFs. The second is the power of diversification. And the third is the avoidance of mistakes through the use of portfolio discipline.
By dividing your money into three buckets, and putting roughly the same amount into each one (the actual amounts will vary a little, depending on your circumstances), you will end up with a globally diversified, low risk, low cost portfolio that will only require about 15 minutes of your time once a year to maintain.
If you’re wondering how something so simple can be so powerful, remember what Albert Einstein said: “Everything Should Be Made as Simple as Possible, But Not Simpler.” Wall Street and the financial media go out of their way to convince investors that investing is complicated, because they want you to hand your money over to their expert care. But you can own virtually every stock and bond in the world, with little work and very low cost. So why would you intentionally make things any more complicated than they need to be?
For more details on how to build your own, customized three-fund portfolio, send an email to us at info@zeninvestor.org and put “simple portfolio” in the subject line.
It is good advice to start with index funds or low-cost muautl funds when you want to invest in the stock market. However, these funds have the pitfall that they give the false impression of safety. When stock markets go into a down-trend you can lose a lot of money with these funds. When you start investing, keep a very close eye on the direction of the long-term trend in the market. When you do this, you can make good profits and you don’t need to spend time on researching individual stocks.