Over
the past many years I’ve reviewed the articles and tuned into the presentations
offered by the investment experts.
Though there was once a time when such advice by the professionals varied,
those days are long behind us. With few
exceptions, the only recommendation you’ll now receive from the nation’s
anointed financial planers is uniformly consistent. The recommendation: (1) Select a fiduciary as your advisor to whom
you’ll deliver your assets. (2) The
advisor will select a portfolio of mutual and/or exchange traded funds into
which your assets will be placed. (3)
You’ll take no active interest in your account, but rather count upon the rise
in the market over time to guarantee a prosperous future. (4) As your net worth rises and falls with
the vagaries of the market, you will remain invested in this manner until your
retirement.
Imagine
my surprise this week when I stumbled upon an article suggesting a different
method for long term investment. The
author is Arielle O’Shea, an investing writer for NerdWallet, who has been
writing about personal finance for more than a decade. In response to a query on how a $10,000
windfall might be profitably invested, she offered the following comments: “Maybe you want to invest in stocks. Go for it.
Set aside a small chunk of money to play the market. Stock buying requires researching stocks—if
you’re going to own a piece of a company, you want to know what you’re getting
into. So make sure you’re up to the
task.”
I
approve of Ms. O’Shea’s suggestion. This
is the method I chose some years ago when I took charge of a trust portfolio,
which I then operated successfully for 21¾ years. I selected companies in healthy industries
with a history of stable or increasing earnings, a generous portion regularly
passed on as dividends. I preferred
companies with reasonably low price-earnings (P-E) ratios, and reviewed the
portfolio every several months so to dispose of those no longer meeting the
criteria. The system worked well, in
that both dividend income and asset value increased handsomely over time. Though aspects of the market have changed
over the years, I believe specific stock
choice is still the best approach.
A
final thought: If you’re reasonably astute and organized, you’ll find no better
handler of your financial affairs than yourself. No one else will match your interest in your
own well-being. Investment concepts can
be learned and with trial and error you’ll soon get the hang of it.
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If you enjoy this
weekly Straight Talk by Al Jacobs, you’re invited to check out my monthly
Financial Newsletter, as well as my new book, The Road to Prosperity
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