That’s time you could have spent researching and finding more high-return opportunities that are hands-off in nature. Getting hands-on with investments takes time. You can achieve a much higher return on your money if you regularly monitor your portfolio and make the necessary trades yourself rather than hiring a financial advisor who takes a hefty slice off the top.īut there are, of course, downsides to being a hands-on investor. The same is true of other types of investments, such as stocks. That’s why the average fix-and-flip return comes in at 40% ROI. For instance, in the case of fixing and flipping, if you carry out the necessary work yourself, there’s no outlay on outside contractors, leaving you to recoup more of the resale value. Some investors have a contracting background and genuinely love fixing and flipping houses because they’re getting paid to undertake work they love anyway.īetter yet, these types of do-it-yourself investments almost always return higher yields. You can see it with real estate, for example. Some people love to get involved with their investments for the benefit of adding value and being part of the process. We’ll take a look at both approaches before revealing an investment instrument that allows you to benefit from the best of both worlds. There’s no right or wrong way to approach investing in this regard. For so-called “hands-off” investors, there’s nothing more valuable to them than their time, which means they almost exclusively look for investments they can put on autopilot. All proceeds from the book go to a nonprofit, the Consumer Federation of America, in support of financial literacy.For some investors, there’s no better thrill than rolling up their sleeves and getting in the trenches to achieve substantial returns. If you would like to learn more about patient investing, my friend Patrick Geddes has written a book titled “Transparent Investing: How to Play the Stock Market without Getting Played.” MarketWatch readers can get a free Kindle copy by going here by January 27. To quote Buffett again, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” No? Then you shouldn’t be investing at all. If you take a few minutes to read through it, year-by-year, it’s hard to avoid a simple truth about investing: Wars, bubbles, credit defaults, pandemics, currency devaluations, inflation - none of it stops the upward climb of stock values in most years.įor over 100 years stocks have roughly doubled every eight years.Ī dollar invested 50 years ago in the S&P 500įinally, there is no five-year period where the S&P did not register a positive return.Ĭan you wait up to five years for the stock market to find its footing and give you the return you seek? Great, you’re an investor. The table lists market returns back to 1934 and events in the news during those years of gains, as well as losses. They have bought what Wall Street is selling, which is action over intelligence, buying over owning, and blind greed over diligence.įor perspective when stock market volatility creeps up, I refer clients to what we call our “Wall of Worry” table. They have overinvested in a small number of companies. The unprepared are, by definition, impatient. As Warren Buffett put it: “The stock market is a device which transfers money from the impatient to the patient.” Remember, though, that as some investors exit the market, others enter. A stock price is, after all, a number today that tells a story about tomorrow. Yes, stocks can go down in value, particularly when a few have been bid up out of proportion to their ultimate long-term profitability. Want to be a better investor? Sign up for our How to Invest series When you see a stock market sell off, always remember there are two participants in each and every transaction - a seller and a buyer. But what about the unprepared?įor them I offer a fundamental insight, one which can escape even seasoned investors. Nothing about what we’re seeing now should be surprising - or particularly dangerous to the prepared. The recent stock market volatility, following years of up markets, is nevertheless the most widely forecast financial reversal in recent history.
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