I’m asked all the time about the latest investment trends: Should I invest in bitcoin? Real estate is really taking off, should I buy a rental? What about Tesla – are we all going to be driving electric cars in 20 years? At the heart of all these questions is that investors are often looking for a get rich quick idea. We have the notion that if we can just find the right investment at the right time, then we’d be set for life! Did anybody reading this happen to buy Microsoft in the 1980s?
The reality is that successful investing is somewhat boring, and usually doesn’t involve the latest investment “fad.” In my mind, to have a good investment experience, you need to do a few things:
- Save 10-20% of your income
- Don’t bet on just one horse (ie you want to broadly diversify)
- Don’t try to outsmart the collective wisdom of all other market participants (ie don’t try to “time” the market).
- Be patient. Let time compound your money, and your wealth will grow significantly.
Take a look at this chart of the MSCI World Index. It shows that $1 invested since 1970 would have grown to $69 (as of 2019). So, you if had invested $10,000 in 1970, your investment would have been worth $690,000 in 2019. Pretty phenomenal growth if you ask me! There is no guarantee that future returns will be similar to past returns; however, I believe that investors who follow the above instructions (save, diversify, don’t time the market, and have patience) will be able to capture returns when the market does deliver them.
•In US dollars. MSCI data © MSCI 2020, all rights reserved. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.
•Past performance is no guarantee of future results.