My favorite joke so far this year (as of June 4, 2022) has been, “When you buy the dip but the dip keeps dipping”. It has helped me feel better as I see all the returns from last year vanish, and probably sourced from my inexperience as I’ve grown up in one of the greatest stock market decades when “Stonks only go up”.

Lately the conversation in my group chat has shifted to mitigating losses during a bear market. We know interest rates are rising, global fiscal policy is okay taking on some economic hit as we take a stance against Russia, and Covid continues to pressure supply chains and goods production. So is it better to stay in cash until it’s all over? F*** No! The best way to mitigate losses is to stay invested during this time and let the market mitigate your losses.

The S&P 500 index is down about 14% year to date. It sucks but somewhat expected as there’s a market crash every 4-5 years. What you may not realize is that there have been 6 more positive days of returns this year than negative days (56 positive days versus 50 negative days) and this is in line with long term averages. By doing nothing, you’re letting the market claw itself back for you.

In and around a bear market, the daily market returns ends up being more volatile as well. Said another way, while we see some bad daily returns, we also see some of the best daily returns. About half of the S&P 500s top returns happen in a bear market and another 34% happen in the two months right after. These top days are few and far between, concentrated at the top, and you have about 50/50 chances on trying to time it. Those who miss out end up digging a deeper and deeper hole.

But stop right there, don’t try to time the market for those best days because the cost of getting it wrong is not worth the extra points from getting it right. If you take just the top 25% of daily returns this year, the S&P 500 is up 41%. These days have helped investors to mitigate their losses from the bad days. If you missed out on just 5 of the top days so far this year, the year to date return for the S&P500 would have been down another 11%, almost doubling the losses so far.

So what should you do right now? A bear and bull market shouldn’t change the strategy of a successful retail investor, continue the strategy as is: stay diversified, rebalance, tax loss harvest, monitor your cash buffer, and put as much money to work as often as you can.

We’re finally seeing some prolonged periods of negative returns in the stock market, and my public market tech investors probably know this all too well as their down trend started around late February of 2021. It’s a good lesson on staying (key word) diversified because of how quickly market environments can shift.

Compliance stuffs
Just remember, I’m not your financial advisor so the information may or may not best apply to your situation and you should get formal advice prior to doing anything. The information/data that is shared should be double checked by you and any conclusion that is driven based on past data is not to be interpreted as my advice for your future. I will do my best to only write what I think is true and right, but mistakes happen and we’re all learning together – this is meant to be an informal conversation.

The day-to-day market volatility to begin 2022 has been a wild ride. I have no idea what’s moving markets on a day-to-day basis or to what extent, and nobody really does to be honest. As a financial advisor, here’s what I’m doing about it for myself.

Nothing. 

Okay, just kidding – kind of. I’m not changing my portfolio strategy and I’m certainly not trying to pick specific stocks or a certain strategy to position myself better based on any geopolitical, economic, or sector based current events – actively managing a portfolio like this is overwhelmingly expected to do worse than just picking the benchmark. You can read more about my thoughts on this on this earlier blog post.

But, I have to do something, I can’t just sit back and let the headlines dictate my portfolio experience (…and emotion).

Here are the four things I’m actually doing: 

Confirm My Cash Buffer
This is the cash I’ve set aside in case of any financial emergency. Stocks are volatile, we’re seeing it now. My cash buffer lets me ride out the market cycles without having to pull stocks at a trough in case of an emergency. The compounding effects of reducing investment during a trough is incredibly harmful to your future value. It’ll take a much greater comeback for me to recoup the money I’ve lost if I pull out during a trough. Think about it, 10% returns on $100 and $50 are not the same.   

If my cash buffer is below its target, I’m only going to sell as much of my portfolio as it takes to get that back to target. Anything more and the opportunity cost of the future value is too high.

Stop looking
Regardless of what the textbooks tell me about benchmark investing being elastic as long as I can ride out the cycles, I’m a fearful person and I always think worst case scenario (that I lose all my money). I know if I saw my portfolio’s actual balance drop over the last few months, I’d be much more likely to take out my money and wait until things settle down. Theoretically, seems like a great idea. Never (incredibly, like incredibly-incredibly rare) does this work and the opportunity cost is too high to justify it.  

I still keep my eye on the market, just not my own account. Delete the app, delete the shortcut. Volatility is a lot more bearable when you just see it on the news. I’ll check every couple of weeks when I get my paycheck and need to invest some extra money.

Invest Any Excess Cash
Buy low, sell high. I’m trying to buy low with any extra money I get, I just never know when the actual low is (nobody does). Invest as much as you can and as often as you can; this is a much better strategy than trying to predict the low.

This is another way to build up that cash buffer back to target. If you know you’re going to be expecting some cash, no need to sell assets. As long as the cash comes in within the month, contribute it toward your cash buffer then instead of selling some assets and then reinvesting the cash income later.  

Rebalance and Tax Loss Harvest
Another way of managing risk is by sticking to my target allocation. This increases the chances of me realizing the expected return and protects my downside risk to the point where I’ve decided I’m comfortable having. If anything is overweight, sell it. If anything is underweight, buy it.

I’ve written about tax loss harvesting before. It’s a great, easy strategy to try and boost your after-tax returns. Watch out for the wash-sale rule!

—

That’s it. That’s all I’m doing. Nothing fancy, nothing cool, but it’s a sophisticated way of managing my own portfolio.

Compliance stuffs
Just remember, I’m not your financial advisor so the information may or may not best apply to your situation and you should get formal advice prior to doing anything. The information/data that is shared should be double checked by you and any conclusion that is driven based on past data is not to be interpreted as my advice for your future. I will do my best to only write what I think is true and right, but mistakes happen and we’re all learning together – this is meant to be an informal conversation.

It’s a tough question and a lot of us just push it aside until it’s too late because it’s overwhelming to try and predict the variables and projections that far out. The challenge is true, but it’s a lot easier than you think to get started with a ballpark answer.

Calculating How Much You Need
Simply sum your monthly expenses, annualize that, and multiply by 25. That’s your target portfolio on which you’ll survive off of 4% annual withdrawals to cover all expenses until the end of your life. For example, if you live off of $100K a year, then your target portfolio is $2,500,000.

This rule is based off of research by William P. Bengen. His research looked at a portfolio’s ability to withstand consistent distributions against real time stock/bond market returns (with volatility) and inflation.

Knowing your target portfolio is powerful because it puts you in control of your own financial freedom instead of the typical “I’ll retire at 65”. Do it when you want to by developing and sticking to a portfolio contribution (savings) plan and asset allocation of diversified stocks and bonds.

Developing a Savings Plan
Coming up with a savings plan is just as easy thanks to a concept called the time value of money (Khan Academy will explain this a lot better than I can). Here’s a calculator with some basic definitions below to help you with the inputs. Whatever your savings number is, take advantage of all your different accounts to increase your efficiency (401Ks, IRA/Roth IRAs, and/or normal brokerage accounts).

Present Value (PV) -How much you have saved toward retirement today, including 401K, IRA, Roth 401K/IRA, regular brokerage accounts, excess cash

Payments (PMT) – Leave this empty, it’ll be your periodic contribution to achieve the target portfolio. This is what you’re solving for.

Future Value (FV) – Your target portfolio value (don’t worry about inflation, the 25x rule already accounts for this)

Rate (I) – This is your projected portfolio growth rate. It’s likely your portfolio will go from aggressive to more conservative over time but will average out to be ~60% stocks and 40% bonds. See long term historical averages for this type of portfolio and use that as your growth rate. Keep in mind that this is oversimplification, but a necessary to get the ball rolling.

Periods (N) – This is for how long you’ll continue to save. Play around with this until you feel you’re at a point which is doable and reasonable.

Compounding – Most of us save monthly, choose monthly. If you want to make a lump sum payment at the beginning or end of the year, choose annually (I would not recommend going this route of savings unless you don’t have an option).

Adjust as Life Changes
If 2020 has taught us anything, it’s that life is incredibly unpredictable and impossible to plan out far in advance. That’s fine, don’t let that paralyze you from getting started. As life changes and as expenses change, redo the equation and make adjustments to the savings plan. It’s a lot easier to make adjustments to your savings plan than to try and catch up when it’s too late and have to make adjustments to your lifestyle.

Compliance stuffs
Just remember, I’m not your financial advisor so the information may or may not best apply to your situation and you should get formal advice prior to doing anything. Seriously, if the cops call I will say I do not know you. The information/data that is shared should be double checked by you and any conclusion that is driven based on past data is not to be interpreted as my advice for your future. I will do my best to only write what I think is true and right, but mistakes happen and we’re all learning together – this is meant to be a conversation. My employer has nothing to do with this blog – in fact, they’re probably upset I’m writing here instead of working.

Unlike Donald Trump. the tax brackets from the Tax Cuts and Jobs Act of 2017 (TCJA) have another four years. This was a very popular act that lowered the marginal income tax bracket for many Americans (here’s a before and after comparison. Keep in mind the IRS adjusts these numbers each year to account for inflation). Unfortunately, the marginal income tax brackets revert to what they were before starting in 2026. This temporary period of lower tax rates may be an opportunity for you to increase your after-tax return on the investments from your retirement accounts (Traditional and Roth IRA/401(k)) by contributing more to a Roth account or converting assets from Traditional to Roth.

The important difference in a Traditional and Roth account is when you pay taxes. Both are taxed at ordinary income tax rates. Traditional accounts allow you to defer taxes now and pay when you make a distribution during your retirement years. Roth accounts force you to pay taxes when you contribute to them, but then distributions are tax free.

Roth accounts make sense for people that believe they’re in a lower tax bracket now and will likely be in a higher bracket later. For example, younger, entry-level employees are usually in the lowest tax bracket of their lives (#startedfromthebottom). As they gain experience and earn promotions, they make more money and move up in marginal tax bracket. With more money, they may become accustomed to a more expensive lifestyle that carries on in retirement. Whatever their lifestyle costs, all their Roth distributions will be tax-free because they already paid taxes when they contributed to it. If they make distributions from a Traditional account, those distributions count toward their income that year and will be taxed at the marginal income tax rate then.

If this sounds like you, or you think you’ve reached the point that your current lifestyle is how you’ll be living like in retirement, then you should consider converting assets from a Traditional account to a Roth account to take advantage of the TJCA. The benefit is the difference in tax liability due today versus later. If you think you’re making more money than you need now or will ever need (annually) for the rest of your life, then it doesn’t make sense and you can stop reading. The Traditional account is for you.

Converting Traditional assets to Roth is easy. You’ll do a rollover from one account to the other. Be careful though and work closely with a CPA to do so because all the deductions or returns you received from contributing to your Traditional account will have to be returned to the IRS; this is the cost of this strategy. The taxes are due whenever you file for that year, so you may have a little while to save up for it. Many people break down the conversion into multiple years to manage the tax liability’s impact to their cash flow.

Two things in life are for sure, death and taxes. This strategy allows you to have some control over when taxes are due and the opportunity to create some tax alpha by taking advantage of the TCJA.

Compliance stuffs
Just remember, I’m not your financial advisor so the information may or may not best apply to your situation and you should get formal advice prior to doing anything. The information/data that is shared should be double checked by you and any conclusion that is driven based on past data is not to be interpreted as my advice for your future. I will do my best to only write what I think is true and right, but mistakes happen and we’re all learning together – this is meant to be a conversation. My employer has nothing to do with this blog – in fact, they’re probably upset I’m writing here instead of working.

Contrary to what Drake says, it’s actually not a good idea to keep your money in the grave to use in your next life. When you pass, assets need to be transferred to somewhere. Quite simply, estate planning is formalizing a plan for your affairs (assets and responsibilities) and selecting specific individual(s) to execute it when you pass. An estate plan sounds like it’s something that only wealthy people need. That’s wrong: it’s for everyone and especially for those that have a family.

Take a hands-on approach to estate planning to minimize the government’s role and decision making on your behalf with regard to your affairs at the end of life. The government does this through the probate process (tldr: you have to pay legal fees, it can take a long time, and your case becomes public information).

Here are the five considerations you need to get started. These are called the Core Documents. For most of us, this covers 99% of estate planning.

• Durable Power of Attorney – This document lets you select an individual to make decisions on your behalf in the event you cannot yourself (i.e. you’re in a coma). The powers under this document are commonly financial and legal decisions. You can make changes to this document whenever you want and is not permanently binding.
  
  
• Medical Power of Attorney – This document is very similar to the Durable Power of Attorney, but it is for medical decisions. It’s important to note that this person must be a trusted individual—not your doctor. The kind of medical powers you’ll allow to be made on your behalf include the following:
  • Doctors to work with
  • Treatments to utilize
  • Elective surgeries
  • End of life decisions
    
    
• Wills and/or Trusts – This is meat of your estate plan. These documents will dictate the flow of most of your assets and you will be able to assign a person responsible for carrying out your wishes. Wills and trusts accomplish much of the same; the major difference being that wills go through the probate court (as mentioned above). Because trusts avoid the probate process, your beneficiaries will most often be able to use the assets passed onto them a bit quicker through a trust.
  
  It’s important to work closely with an estate planning attorney on drafting these documents as the wording must be perfectly tailored to your wishes. If you end up pursuing the Trust route (keep in mind, this is not just a tool for the wealthy), you’ll see there are numerous options and different trusts may make sense for different assets and situations. Your estate planning attorney will be able to properly guide you through this as well.
  
  
• Beneficiary Designations – Some assets can be passed on immediately at your death outside of a will or trust. These are accounts like your IRA and/or 401(k), or even a life insurance policy. If you’re like me, you just wanted to set these accounts up and you paid very little attention to assigning beneficiaries because you’re young and you figured you’ll think about it later. Double check who you’ve assigned as the beneficiary, and ask yourself if they still make sense.
  
  
• Guardianship Designations – For those of you with kids, this one is crucial. In the unfortunate event you and your spouse pass, this document lets you assign a guardian for your children. Without this document, the courts will decide your children’s guardian. Your sister or uncle may look great on paper to the courts, but the courts may not realize how often they’re still doing keg stands during the weekends. Note: This is for an example, no disrespect intended.

These are the first steps toward your estate plan. It’s simple enough, but incredibly important to get done as soon as possible and then review once a year. Proper estate planning is all about providing for and continuing to help those you care about even when you can no longer physically. Get started by speaking with a financial advisor or an estate planning attorney.

Compliance stuffs
Just remember, I’m not your financial advisor so the information may or may not best apply to your situation and you should get formal advice prior to doing anything. The information/data that is shared should be double checked by you and any conclusion that is driven based on past data is not to be interpreted as my advice for your future. I will do my best to only write what I think is true and right, but mistakes happen and we’re all learning together – this is meant to be a conversation. My employer has nothing to do with this blog – in fact, they’re probably upset I’m writing here instead of working.

A diversified investment portfolio managed to a custom financial plan is what you need and will always be your best friend. This post is just for those times when you hear a stock tip (legally), have an urge to trade YOLO TSLA options, or just to see “what if”. You know this is riskier, but that’s why you need a trading account.

Trust me, it’s fun
Short-term trading or making market bets can feel like a game. It’s fun to talk about your favorite stock or trade like you would in a conversation about your fantasy team or which team you’re betting on for the NBA championship (The Brooklyn Nets). Quite frankly, that’s just more exciting than talking about tuition planning for your kid’s college (probably go with a 529 plan). Scratch the itch, you can be part of that conversation and have fun. Keep reading, there’s a smart way to bring something to the table with experience without risking your wealth.

And you’ll learn
They say the streets teach you best. I’m certainly not acclaiming to be familiar with the thug life, but I can agree that real world experience is a great teacher. There’s no better way to understand the magnitude of long term trends and the impact to your portfolio than to be hit with short term volatility and 30% swings in both directions. When it’s your money, you’re much more likely going to pay attention. Most of the lessons will be investment focused, but pay attention to your behavior/emotions as well.

But keep it under control
Being able to indulge in the excitement of the markets from a trading account means you won’t do it with your plan-based investment portfolio. You need a trading account, but not as much as you need a financial plan and long-term portfolio of investments. It’s only fun and educational when it doesn’t affect your future lifestyle and sense of freedom. Imagine planning for a down payment on your first house for $500,000, only to experience a 30% loss in the month your cash was due (this is exactly what happened in March 2020). If you don’t have other funds, that’s now a $350,000 house – and a different neighborhood.

The best way to safeguard the long term portfolio is by placing a cap on your trading account. One way to approach this is to take about half your fun budget and contribute it to your trading account. Your fun budget is anything in excess of funds earmarked for what you need (short term needs and longer term goals). Depending on your savings, that can be a huge number and you don’t have to do all of that – but don’t do more than this amount and keep it steady.

Compliance stuffs
Just remember, I’m not your financial advisor so the information may or may not best apply to your situation and you should get formal advice prior to doing anything. The information/data that is shared should be double checked by you and any conclusion that is driven based on past data is not to be interpreted as my advice for your future. I will do my best to only write what I think is true and right, but mistakes happen and we’re all learning together – this is meant to be a conversation. My employer has nothing to do with this blog – in fact, they’re probably upset I’m writing here instead of working.

Back in June I wrote about how to decide if you should be saving, investing, or paying (down debt). This post is to supplement that post: if you’re paying down debt, that doesn’t mean you can’t invest until you’re debt free. You can do both via the margin feature on your regular brokerage account. Note: this step is still secondary and maintaining emergency savings buffer of 3-6 months of spending should still be the first step.

Margin is a type of loan given by the brokerage firm where your investments are held. The loan uses your investments as collateral. This means the greater the value of your investment account, the more you can take on margin. Margin allows debtors to decrease their net debt interest rate by acting as a self directed debt consolidation strategy. The idea is that you withdraw money from your brokerage account by means of a margin loan at a lower interest rate, and use the cash to pay down debts with higher interest.

Debt interest is a negative performing asset on your balance sheet and the higher the rate of interest, the worse it is. Here’s an article explaining the impacts of high interest debt on your financial future – TLDR: it’s bad.

Below are three benefits to using margin to pay down debt:

• You can invest and pay down debts at the same time.
• Often times, the margin interest will be lower than a traditional debt consolidation loan. According to Bankrate.com, the average loan interest rate as of November 2020 was anywhere from 5.99% to 35.99%. Interactive Brokers (brokerage firm) is currently offering margin interest starting at 2.58%, decreasing by tiers as you increase the asset value of your brokerage account.
• Flexibility. You can pay down the margin loan at your own pace as long as you don’t get a margin call (see below). In the event of an emergency, your cash flow won’t be affected by mandatory payments on your margin loan. This is is true as long as you don’t sell your investments and emphasizes the importance of having a savings bucket first.

And here are the three potential dangers from this strategy:

• Investments can be volatile. Market values of the global markets fluctuate daily. Volatility is dangerous because of a margin call. Because the margin loan uses the investments as collateral, if the value of the investments drops too much, then you would have to pay down the margin loan until the value of the assets and the loan is back to its agreed upon ratio. An investor using this strategy should invest in more stable investments, like bonds. If you’re utilizing this strategy, it’s also a good idea to have some buffer in the ratio of loan to assets so that you’re less susceptible to daily volatility and can afford some slack.
• Bonds present a high opportunity cost because they are low risk investments. Stocks and other riskier investments are expected to generate greater returns over the long term. However, the chance stock investments result in a margin call is also higher. While the opportunity for potential positive returns is less, the opportunity to reduce debt interest is guaranteed because you know the difference in your high interest debt and the margin loan rate. For example, paying down a credit card with an interest rate of 18% using a 2% margin loan is essentially an investment gain of 16%.
• Just like any investment, margin debt has interest. Essentially, you’re moving one type of debt (high interest) to another kind (low interest). Interest is the cost of borrowing money and will be a driver of negative value to your net worth. The longer margin debt stays on your balance sheet, the more in interest it’ll cost you. Ideally this interest would pay for itself from the expected return from the investment account used as collateral, but this isn’t always the case. Nonetheless while you have higher interest debt, it’s still a positive impact on your balance sheet to pay that down using low interest margin debt.

Paying down debt can be daunting. Using margin can make it easier while also allowing the debtor to invest toward their future. If you’re considering using this strategy, I would recommend speaking with a professional due to its riskier nature.

Compliance stuffs
Just remember, I’m not your financial advisor so the information may or may not best apply to your situation and you should get formal advice prior to doing anything. The information/data that is shared should be double checked by you and any conclusion that is driven based on past data is not to be interpreted as my advice for your future. I will do my best to only write what I think is true and right, but mistakes happen and we’re all learning together – this is meant to be a conversation. My employer has nothing to do with this blog – in fact, they’re probably upset I’m writing here instead of working.

The end of the year is nearing and thoughts about compensation and bonuses are natural. Unfortunately, that conversation hasn’t always gone my way. But there other ways to increase net pay employer without directly getting a raise. As long as your employer offers a retirement account via a defined contribution or defined benefit plan  (for example 401(K), SEP IRA, Pension, etc – see here for a list of all types of retirement accounts), you can force more pay through a contribution match benefit. If you’re annoyed and saying, “oh man, another planning strategy where you have to put off benefits until later”, I hear you. Think about this way: the more your employer contributes to your retirement plan, the more you can spend your own money to further other goals or spend it on something you enjoy today.

Your employment contract should state that they’ll make a contribution match to your retirement account up to X%. What that means is however much you contribute as a percentage of your salary, your employer will contribute the same amount up to their stated limit. 

In addition to more money, retirement plan contributions allow the employee to experience levered returns without taking on the risks of leverage. The employee contributions are your funds to keep—you don’t have to pay it back like borrowed funds. That may be obvious, but now when you think of what this means in terms of losses, the investments within the retirement account would have to lose more than 50% of their value for the employee to lose more money than his/her initial contribution. Even at 50% losses, the employee’s balance would be a $0 change based on what they put in themselves. On the flip side, let’s say the investments gain 50% in value—that translates to a 100% increase in the employee’s account because the investments made from the employer’s contributions are invested the same way. As an investor, you gain downside protection with upside potential.

At this point you know I’m a sucker for the power of compounding. Let’s assume I make $100,000 for the rest of my life, investments continue to generate an annualized 10% over the long term, and my employer matches contributions up to 3% of my salary. Same amount invested on my behalf, same earnings (%), yet twice as much value in the account with the match. Theoretically it’s obvious, yet not taken advantage of in real life by so many of us. Saving is a lot easier when someone else is helping you.

Years	3% Contribution w/ Match	3% Contribution w/o Match
0	$6,000	$3,000
5	$46,294	$23,147
10	$111,187	$55,594
15	$215,698	$107,849
20	$384,015	$192,008

You may not get the big raise or bonus you think you deserve at year end, but that’s out of your control—so focus on what you can control. Be sure to maximize all the resources that are available to you to get your raise another way.

Compliance stuffs
Just remember, I’m not your financial advisor so the information may or may not best apply to your situation and you should get formal advice prior to doing anything. The information/data that is shared should be double checked by you and any conclusion that is driven based on past data is not to be interpreted as my advice for your future. I will do my best to only write what I think is true and right, but mistakes happen and we’re all learning together – this is meant to be a conversation. My employer has nothing to do with this blog – in fact, they’re probably upset I’m writing here instead of working.

You don’t get what you pay for in the public stock market. One of the easiest ways to boost investment return is to choose low cost investments. From the compounding effect on returns, the difference is significant over time.

Let’s say you wanted to invest in the US Stock Market with an ETF or mutual fund. You’re 30 years old, have $100,000 saved up and contribute another $15,000 at the end of each year to your investment portfolio. We know that the US stock market returns 10% to investors over the long term. Simply by choosing the lowest cost fund, you should have ~$1 million more by the time you’re ready to retire at 65. The value add from low cost funds is most significant over longer periods of time and on higher dollar amounts.

All ETFs and mutual funds are products, just like what you see on the shelf at Target or at the grocery store. The product price is made up of various management and administrative fees, summarized as the expense ratio. This fee is written a little differently than your typical $19.99, it’s shown as a percent of each dollar invested. A lot of times, it’s an invisible fee as it’s taken out of performance automatically.

Actively managed funds have higher expense ratios because more time and effort goes into managing the fund strategy and the fund managers say their strategy outperforms the overall market – they say you should pay for a better product. The data shows that over the long run performance is typically worse. The average actively managed ETF costs investors 0.67%.

Passive funds are generally cheaper because the management strategy is simple – just match a chosen benchmark. But even while providing the same expectations, fund prices can differ. The average investor paid 0.51% in fees.

To invest in the US Stock Market, the lowest cost fund I know of is Vanguard Total Stock Market Index ETF (VTI). This is a passively managed, diversified portfolio with exposure to ~3,000 companies (all companies trading publicly in the US). The ETF costs just 0.03%.

Whatever funds you want to use, pay attention to the expense ratio. It’s as easy as going to Google and searching the ticker and/or name of the fund followed by “expense ratio”.

When we talk about fees, it’s all about optimization of the portfolio. The most important principle is still this: invest early, invest often, and ride the wave. In each of the three scenarios above, the investor ends with with a lot more money to use by investing rather than keeping as cash in a savings account.

Compliance stuffs
Just remember, I’m not your financial advisor so the information may or may not best apply to your situation and you should get formal advice prior to doing anything. The information/data that is shared should be double checked by you and any conclusion that is driven based on past data is not to be interpreted as my advice for your future. I will do my best to only write what I think is true and right, but mistakes happen and we’re all learning together – this is meant to be a conversation. My employer has nothing to do with this blog – in fact, they’re probably upset I’m writing here instead of working.

“Buy low, sell high” doesn’t work. Yes, we all want to buy at the lowest price and sell at the highest to maximize our return. However, this kind of thinking faults the investor into market timing and trying to outsmart everyone else. It doesn’t work and that’s why most retail investors fail to beat the benchmarks. As an investor fueling your financial plan and balance sheet, your mantra should be to buy and hold and to invest as early and as often as you can.

Holding onto your investments can take a lot of patience and conviction. How do you know you didn’t buy at the top? It doesn’t matter.

Let’s say you’re a smart investor and wanted to invest passively in an S&P 500 index fund. However, assume you are also the unluckiest investor and bought into the S&P 500 right before the market crashed – you would still have more money today than when you invested.

The Growth of $10,000 Through 2019

If you invested in the S&P 500 right before….	Today, you would have….
Great Depression (Oct. 1929)	$33 million
Black Monday (Oct. 1987)	$205,000
September 11th (Sep. 2001)	$41,000
The Collapse of Lehman Brothers (Sep. 2008)	$32,000

It’s impossible to know what’s going to happen to the stock market tomorrow to ensure you’ve bought in at the best price possible. Uncertainty is inherent with investing and you do risk buying right before a market crash, but waiting it out is just as risky. When it comes to investing in a diversified investment portfolio for the long term, go ahead and take the plunge. Market timing risk is most often mitigated by time in the market itself because investments are elastic and over the long term, you will achieve the expected results.

Compliance stuffs
Just remember, I’m not your financial advisor so the information may or may not best apply to your situation and you should get formal advice prior to doing anything. The information/data that is shared should be double checked by you and any conclusion that is driven based on past data is not to be interpreted as my advice for your future. I will do my best to only write what I think is true and right, but mistakes happen and we’re all learning together – this is meant to be a conversation. My employer has nothing to do with this blog – in fact, they’re probably upset I’m writing here instead of working.