At some point during your career, you’ve had to make difficult choices. As artists, we’re constantly asked to choose. Do you want the part that’s more personally satisfying or the gig that pays well? Should you audition for a show that pushes the limits of your skill or the one in your wheelhouse where you’re sure to stand above the rest? These decisions are rarely fun, and yet, we know that avoiding them doesn’t make the pain recede. Rather, such avoidance can actually be career suicide.
It’s the same for investments.
I understand from experience how easy it can be to freeze up and choose not to invest because the right decision seems so difficult. How do you pick from the thousands and thousands of available investments? So many of them look good. What if you make the wrong choice?
Much like an actor chases the perfect performance and always finds room to improve, so it is with investing. You may spend days, months or even years searching for the perfect investment. Sometimes, accidently, you may get close, finding a juicy money-maker that was exactly what you’d dreamt about. But sadly, even near-perfect investments don’t last forever, so when it ends you’ll still have to go out and look again.
Let me share a single tenant that can drastically reduce your stress around this process:
There is no perfect investment. Quit looking.
If that doesn’t take some of the pressure out of investment shopping, I’m not sure what will. Like the Loch Ness Monster or Big Foot, the perfect investment is an allusive, mythical beast that some investors spend a lifetime chasing. Here’s a better way to begin the investment game:
1) Diversification is your friend when you’re a beginner. By choosing several investments instead of one, you’re less likely to make a critical mistake that costs you a fortune.
2) If you’re starting small and can only afford a single investment, consider a mutual fund. Mutual funds have three traits that are wonderful for beginners:
a. Your money is pooled with many other investors to purchase lots of different securities. In some cases, a fund will be as many as 200 different stocks with your money!
b. A prospectus that tells you what the mutual fund is trying to achieve. Some funds have large company stocks and are trying to beat the stock market. Others have stocks and bonds and are trying to garner returns while lowering the risk level to individual investors. Still others are invested in money markets that rarely lose money, but will never make much, either.
c. A professional manager buys and sells the investments inside the portfolio so you don’t have to worry about when to buy or sell.
3) Review your fund’s performance quarterly, rather than every day. I know in the beginning, some people get excited about their investments, but imagine that your biggest critic is standing over your shoulder while you’re working. Would it make you better? Would it help? No way!
In my next blog post, we’ll explore further how to pick a fund that fits your goals. We’ll examine the difference between index funds and managed funds. I’ll introduce you to a mutual fund look-alike called an exchange traded fund. None of these are as complicated as they seem! In the next few weeks you’ll gain the knowledge to invest with confidence.
You can’t achieve greatness if you never make the decision to go for it! Much like your creative endeavors, as you invest more it becomes familiar and you start to master some of the basics. But just as an artist can’t learn to paint without a brush and canvas, an investor can’t learn to invest without finding something to invest in and getting started. It’s that first choice that begins the process, builds your confidence and sets you firmly on the road to abundance!