Here’s a simple 4×6 card with some if the best financial advice you’ll ever receive from University if Chicago Professor Harold Pollack. But the lesson here is that once you have an income that you can live off and can save a little bit besides, managing your finances shouldn’t be all that hard.
Cheap. Pollack’s only investment rule is to buy inexpensive diversified mutual funds or ETFs. He says to avoid picking stocks yourself or paying high fees for active managers. Typical managed funds have fees of 1-1.8% of invested capital! whereas ETFs can be as low at 0.2% the rest you get to keep invested.
Simple. The people making it complicated are often trying to make money off you.
Focus on saving. More effective than trying to beat the market is targeting a high savings rate. Pollack’s 20% is ambitious, but do that and you can afford to get other decisions wrong.
And the advice has gone from viral, to mainstream with Money Magazine publishing the card as one if their investment themes for 2014. And while biased towards the US, the basic advice is very sound, useful, and applicable.
Happy investing in the Year of the Wooden Horse.
This is a great help to me. Just earning enough to think about investing beyond Insurance and mutual funds. ks
Here’s more suggestions, based on legendary investor Bob Farrell who was Chief Market Strategist for Merryl Lynch for 25 years; and for 16 of the 17 years prior to that, he was the top ranked Wall Street analyst in predicting the overall direction of the stock market.
1.Markets tend to return to the mean over time.
2.Excesses in one direction will lead to an opposite excess in the other direction.
3.There are no new eras — excesses are never permanent.
4.Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.
5.The public buys the most at the top and the least at the bottom.
6.Fear and greed are stronger than long-term resolve.
7.Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.
8.Bear markets have three stages — sharp down, reflexive rebound and a drawn-out fundamental downtrend.
9.When all the experts and forecasts agree — something else is going to happen.
10. Bull markets are more fun than bear markets.