Investment Tip for 2016: Be Boring!
One of the hardest questions I'm asked is some variation of "I have an extra $10,000 to invest and want to know the best place to invest it." The investment part is relatively straightforward. The hard part is making the boring answer I provide seem appealing.
Various external sources prod us to expect out-sized investment results, whether it's financial industry advertising or stories from friends of high returns with minimal risk. (It doesn't exist.) Thus it's not unusual for people to seek the investment equivalent of a home run. Advisors are not always popular when they recommend playing "small ball" instead.
Carl Richards, an advisor/author, describes a small ball strategy as one that "doesn't focus on rare, showy and hard-to-predict events, but on making small, relatively easy-to-repeat moves that compound into positive results over time."
Richards recognizes that it is "a hard strategy to advocate when the client is expecting something big and bold." When someone comes looking for the next big thing for their $10,000, they often don't want to hear a recommendation that it should be spread around an already-existing, diversified portfolio. Boring!
But over time, boring can typically get you where you need to go. It just may not scratch your itch for excitement. Remember though, that the excitement fades if and when the big bet sours.
Words of Wisdom
Talking about golf is always boring. (Playing golf can be interesting, but not the part whwere you try to hit the little ball; only the part where you drive the cart.) --Dave Barry