With the stock market experiencing a steep decline of late, many investors are questioning how best to invest in this asset class for the long term.
There are three ways to invest in the stock market.
1. Select individual stocks yourself.
2. Hire a professional stock picker to pick stocks for you.
3. Invest in a low cost index fund or passively managed fund that mirrors the returns of its respective index.
Because capital markets are fairly efficient, professional stock-pickers have historically had a difficult time outperforming a comparable benchmark. According to SPIVA, over the past ten years ending June 30, 2019, 87% of domestic large cap, actively managed funds under-performed the S&P 500 index.
For Coffeehouse Investors, common sense wisdom suggests you are better off approximating the stock market average through low cost index funds and passively managed funds.
In this video Coffeehouse Investor Bill Schultheis explains the wisdom of adhering to your financial plan as a guiding tool to navigate these uncertain times.
There have been several bear markets and corrections over the past thirty years.
1987 STOCK MARKET CRASH
2000 DOT.COM BUST
2001 TERRORIST CRISIS
2008 FINANCIAL CRISIS
2013 EUROPEAN DEBT CRISIS
2018 INFLATION SCARE
In every instance the collective creativity and ingenuity of workers around the globe have spurred the capital markets to new heights following these market declines.
Recently, the stock market, reflected by the Dow Jones Industrial Average, had its single largest point drop in history, down 2997 points, a 13% decline. This drives the bear market returns of 2020 to -26%. Are you struggling through this bear market?
Coffeehouse Investors offer three steps to lift your spirits and get on with your life, as you inspire others to do the same. More information can be found at https://www.coffeehouseinvestor.com
Amid unprecedented volatility in the stock market, Coffeehouse Investors focus on their asset allocation between stocks and bonds, to address the risk that impacts them the most.
For younger investors, the long term risk isn’t a downturn in the stock market, it is the impact of inflation on the purchasing power of your portfolio in retirement.
If you have 20 to 40 years of savings in front of you, a declining stock market allows future savings to be invested at lower levels, boosting expected future returns.
If you are getting close to retirement, or are retired, consider keeping a healthy amount of money that you are likely to draw on for living expenses over the next 6-8 years outside of the volatile stock market.
Amid these uncertain times and volatile stock market, Coffeehouse Investors embrace three simple principles
1. Don’t put all your eggs in one basket.
2. There’s no such thing as a free lunch.
3. Save for a rainy day.
As the uncertainty of the coronavirus unfolds in countries around the world, investors are challenged to move beyond growing anxiety and volatile stock market, and focus on three Coffeehouse Investor principles. . .
1. Don’t put all your eggs in one basket. Diversify between stocks and bonds so that it reflects your need and ability to take risk in your portfolio.
2. There is no such thing as a free lunch. Capture the return of broad asset classes through low cost index and passively managed funds.
3. Save for a rainy day. Create a financial plan that offers clarity on your savings amount while working and spending amount in retirement.
The coronavirus is impacting the health of human beings around the world, curtailing the growth of businesses and economies, and causing extreme volatility in the stock market.
No one knows the magnitude of the virus’s spread, but if history is any guide, the bright minds of people who are working on this crisis will eventually contain it in a successful manner.
Index funds are the smart way to build a successful portfolio. This approach is founded in the second Coffeehouse Investor priniciple, “There is no such thing as a free lunch.”
It’s not that you can’t beat the market over time, but your chances of accomplishing this by choosing your own stocks, or letting a professional stockpicker choose them, is slim.
A simple approach to investing in the entire stock market is to purchase one “total stock market” index fund. But can you do better?
In this video, Bill Schultheis suggests that one way to accentuate a total stock market fund, is by adding Value, Small, and International dimensions of the stock market to your portfolio.
What matters is not which approach you select, but whether you have the tenacity to stick with what you choose when things aren’t going your way.
For more information, visit www.coffeehouseinvestor.com
A major 2019 global study study revealed that in over 80% of households, women take an active role in the “day to day” financial decisions o managing the family checkbook. Unfortunately, in only 23% of these households do women engage in any meaningful longer-term financial planning.
One reason they shun financial planning is that they are turned off by the arrogance of Wall Street’s “know-it-all” attitude of building wealth.
When you embrace the three Coffeehouse Investor principles you take control of your financial destiny by ignoring Wall Street and focusing on those components of wealth management that matter most of all.
www.coffeehouseinvestor.com Index funds Financial Planning
With the stock market trading at an all time high – is now a good time to take profits, or buy more stocks? What happens if you have sold your home and are looking to invest the proceeds in the stock market? Should you wait for the inevitable correction?
Before you do anything, first create a financial plan to serve as your guide in making your allocation between stocks and bonds. Let your financial plan and asset allocation between stocks and bonds drive your investing decisions. Live your life as if the stock market doesn’t exist.
There are three ways to invest in the stock market.
1. Pick individual stocks
2. Let a professional stock picker pick them for you
3. Invest in an index fund that invests in all the publicly traded companies.
Statistically, it is difficult to outperform the stock market over time. The reason why is that when you purchase a common stock, you aren’t really investing in the growth of the company. You are betting that you are smarter than the millions of other investors who are betting on the same growth as well.
That’s only part of the story. The issue is that many investors are not able to stay committed to their investments, and dramatically underperform benchmark indices over time. (See www.dalbar.com)
To explore what strategy is best for you, play a simple game of logic that I created called “Outfox the Box.”