I have some bad news. I’m absolutely sure my investment strategy of buying and holding index funds is going to be beat by some other strategy in the future. In twenty years, when we are looking back, it will seem obvious in retrospect. You’ll hear stories about the guy who called it and got rich doing it. You might even feel bad for your lack of foresight on this topic and wonder why YOU didn’t see it coming.
But I’m also sure there are hundreds or thousands of such strategies. And buying and holding index funds is going to beat almost all of them. And the one unlikely thing that does end up outperforming is impossible to know in advance. It’s like looking at a lotto winner and slapping your forehead and saying, “Duh! Of COURSE it was gonna be 10, 14, 22, 47, 70! I should have seen it coming!”
So don’t let the opportunity to chase that unlikely outcome deter you from the unquestionable truth: Buying and holding low cost index funds guarantees you your fair share of market growth. The act of buying and holding these funds creates a direct line from the global economic profits back to your wallet. Everything else is some shade of gambling or speculating.
And don’t get me wrong. It’s tempting. So if you are tempted, I suggest my 90/10 rule. With 90% of your portfolio, buy and hold index funds. With the other 10%: GO NUTS. Dogecoin, oil futures, stock tip newsletters, technical analysis, day trading, precious metals, whatever you want! IF YOU’RE THE CHOSEN ONE and can follow your gut to outlandish returns, your 10% will vastly out pace your 90% and you’re rich. And if that happens to not be the case, well at least you still built your wealth with 90% of your portfolio and you’re not ruined.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
One of the rules of the Roth IRA is that you can’t contribute more than $6,000 per year, but you also can’t contribute more than