Take the #Investor5DayChallenge!
The post I’m investing for my kids. Any advice? appeared first on The Motley Fool Australia. –
This morning, I launched the second in our semi-regular investor challenges.
Called the #Investor5DayChallenge, the aim is simple: don’t check your portfolio for a week.
Well, because if you’re a long-term investor (a phrase that Motley Fool co-founder David Gardner rightly believes should be considered a tautology), there’s nothing for you in doing so.
And probably harm.
See, if you’re investing with a time horizon of 3, 5, 10 or 20 years, your returns will owe much, much more to the quality of the businesses you invest in, and almost nothing to daily movements.
Woolworths group Ltd (ASX: WOW), which listed at around $2, is now not far from $40 per share.
Do you know what happened in the second week of February, 1998?
Do you reckon it mattered, on the way to $40?
CSL Limited (ASX: CSL) shares went from $5 to $280 over the past 22 years.
Do you reckon anyone who held those shares cares whether they were up or down in 5 consecutive days in 2003? Or 2016? Or 2020?
See, that’s the point.
If you’d been obsessing over the share price of Woolies or CSL, minute-by-minute, day-by-day, week-by week, month-by-month… don’t you reckon there’s even the smallest chance that a 1%, 5% or 10% fall might have scared you into selling?
If you’d seen Woolies go from $40 to $20 a couple of years ago, might you have been tempted to declare ‘the show is over’ and sell your shares?
Amazon.com, Inc. (NASDAQ: AMZN) (I own shares) famously went from (a split-adjusted) $3 to $100 and back to $9.
Now? It’s over $3,500 per share.
What did the market have to teach you about Woolies? CSL? Amazon?
Or, let me ask this a different way:
Do you do a straw poll of your neighbours and colleagues every morning, before deciding what mood you’re in?
Do you check again, a dozen times a day, just in case they’ve changed their minds?
Of course not.
So why do it with shares?
In case the price falls?
What would that tell you? When Amazon fell from $200 to $180, was the market telling you to sell?
And you would have been very, very poorly served, had you listened.
Repeat after me: The market has nothing to tell us, other than how it feels.
And that’s a terrible way to make investing decisions.
So go on — join the #Investor5DayChallenge.
Click the video below to find out more, and to take the challenge!
Speaking of learning more, here’s a question I received last week:
“Hi Scott, I’ve just started investing, I’m 28 years old and have dived into ETFs for my daughters future instead of using savings accounts from banks in today’s climate. Do you have any tips or advice for a new investor like myself.”
No, seriously. Getting started can be a big barrier for many — maybe most — people.
Biting the bullet and getting started might well be more than half the battle, to be honest.
The longer you do it, and the more you can save and invest, the better off you’ll be.
So, congratulations — you and your daughters will almost certainly (the regulator — rightly — doesn’t allow people like me to write in absolutes) be much, much better off for the decision!
Speaking of regulators, I’m also not allowed to tell *you* what you should do. That would be personal advice.
But I’m allowed to speak in generalities, as long as you make sure you consider how the advice pertains to your circumstances.
In some sort of order then:
1. Make sure that ‘start’ turns into reality. Fill out those forms. Make your first deposit into the linked savings account. Buy those first shares. Just — as Nike says — do it!
2. Don’t obsess over your first purchases. You’ll get it wrong sometimes, I promise. Me too. Try to be roughly right, as often as you can. But don’t let the quest for perfection stop you. Perfect really can — as my boss Bruce says — be the enemy of the good… or the great!
3. Diversify. An ETF or two is a great start. It can be a great finish, too, if that’s all you want to do, or you can start to add individual company shares, over time.
4. Expect the journey to be volatile. Share prices zig and zag. Some days, weeks, months and years will be terrible. Some will be wonderful. You can’t avoid volatility, so make your peace with it.
5. Add anyway. The best advantage any investor can have is time. The next best advantage is regular saving. If the market is up, you’re making money. If the market is down, you get to make your next purchase at discount prices.
The last thing I’ll leave you with is this awesome chart from Vanguard.
The crashes that felt like huge deals at the time? They’re almost unnoticeable with the benefit of hindsight.
Remember that when the going gets tough.
Congratulations on getting started. Your daughters might not know it yet, but on top of all of the more important parts of being a great parent, you’re setting them up for financial success, too — and teaching them the power of investing at the same time.
Just do me one favour: Once you’re set up, pay it forward to some other new parents!
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Scott Phillips owns shares of Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Amazon and CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.