Investing as a Habit

Make safeguarding your retirement a habit

Usually we talk about my investment portfolio, or we analyze specific companies that I’m either invested in, or I’m considering investing in.

Today I want to take a step back from my own portfolio, and the hard work that comes with valuing individual issues, and talk a bit about how you, the average Joe should act to safeguard your retirement, while reducing stress in your life.

What not to do

I cannot repeat this enough, you should not be purchasing individual stocks.

As a general rule, buying individual companies is a losing game, and you will more likely than not under-perform the market.

It doesn’t matter if you’re a “high performing hedge fund” or a “retail investor”, the fact is Stock Picking is very difficult, and only a small percentage of stock pickers will come out ahead.

You are not special, and you will most likely not beat the market.

If you do happen to beat the market, that will likely be out of pure chance, not due to your investing skills.

It’s ok, this happens to everyone, and even the best investors are unlikely to be able to consistently outperform the market.

Let me be clear here, if through study, discipline, caution and wise investment you manage to outperform the general market by 1% annually over a 20 year period, you will be one of the best investors the world has ever seen.

It’s that hard to do.

If you think you can do it, you are fooling yourself.

That said, you’re likely asking me: “Why do you do it then?”

The answer is simple, it’s because I’m an idiot and I’m fooling myself.

It’s really that simple. I will more likely than not under-perform the market over the long term.

What you should do

At the end of the day the best way to safeguard your retirement is to regularly invest in low cost highly diversified index funds.

Every month, simply transfer 15% of your paycheck into your broker and use that money to invest in a simple index fund.

It’s not difficult, it’s not complicated, you don’t need to know any math or be particularly smart, or wealthy.

This is something so simple and easy that even a 5 year old child could do it without any issues.

There is no barrier to entry, there is no minimum investment amount that prevents you from doing it. If one months paycheck isn’t enough to buy 1 share of the index fund, just keep depositing until it is.

No matter who you are, where you live, how much money you make, you can do it.

If you live in Europe, you will more likely than not have access to several Index based ETFs.

Personally I buy VWCE on a regular basis, and use that fund as the core of my portfolio.

There are other options however, for example IWDA is also quite popular and has essentially the same performance.

If you’re based in the U.S. then the VT fund will do the same work.

If you’re uncomfortable with having all of your money in equities, you can simply pick a target date fund.

Target date funds have a collection of bonds and equities, and will automatically re-balance the fund based on how close you are to retirement.

Do you want to retire in 20 years? Simply open an account with Vanguard and enroll yourself in the VFORX target date fund.

Remember, no matter how difficult it sounds, you can do it.

Every month, invest some of your money into your future, and your future will take care of itself.

And remember, I’ll be here, rooting for you!