My friend “Wilbur,” who isn’t a client of my firm, reached out to me the other day. He asked about buying and selling stocks using popular online trading platforms.
Wilbur is a young man, and he’s successfully growing a career. We’ve discussed investments and financial planning topics in the past.
I supported his idea of getting started with a low-cost, diversified index mutual fund. But that’s boring and unexciting when the market is hot and celebrity stocks are in the news.
“Maybe there’s a better, faster way to make money?” he asked.
I told him that, over time, trading in and out of stocks, buying and selling based on speculation, isn’t the best way to put the odds of making money in your favor, even if the trading platform is a new online app or a big-name Wall Street outfit or a discount brokerage firm.
I stressed that buying a low-cost index mutual fund and holding for many years — or even better for decades — will more likely lead to wealth. Wilbur likes to read, and I cited books by the late John Bogle and A Random Walk Down Wall Street by Burton Malkiel, as well as the academic research of Eugene Fama and Ken French.
I concluded the conversation by mentioning that I had once worked in the brokerage business for a lot of years and I recalled a “tongue-in-cheek” saying from that past life that went like this: When the customer buys and sells, the firm makes money, the broker makes money, and two out of three ain't bad!
Get on the winning side of the investment world! Invest for the long term, with properly diversified investments, and keep your costs, such as commissions, charges, and taxes on gains, low. I know, it’s boring, and every investor’s situation is different, but historical evidence suggests that in general it works.
The price for building lifelong investment returns is patience and enduring the inevitable uncertainties of the investment markets.
If you’re a newer investor, you can probably get started yourself with a little study, but sometimes it’s hard to stay the course. This is where a fiduciary advisor can be valuable far beyond their fee. If you need help investing, start by searching for a NAPFA-registered advisor* at NAPFA.org.
*In full disclosure, my firm, Buckingham Strategic Wealth, is a member of NAPFA, and I am a NAPFA-registered adviser.
This article is for general information and educational purposes only and is not intended to serve as specific financial, accounting, or tax advice. The opinions expressed are the author’s own and may not accurately reflect those of Buckingham Strategic Wealth. IRN-21-3014