Why You Need to Think Longer Term About Your Investments

After the start the market has had this year, many of you I’m sure are thinking, “Maybe the best way to win is to not invest at all.”

You couldn’t be more wrong, and on so many levels.

If all we do is acknowledge that inflation never stops and holding cash costs money, the choice has already been made for you.

Increasing life expectancies alone require that we plan for at least 20 years of inflation eating away at our money even after we retire.

[ad#Google Adsense 336×280-IA]Despite high-speed trading, what looks to be an insurmountable advantage for institutions and hedge funds, and the bone-crushing volatility we have seen lately, you still have to find a way to grow your money or get used to the idea of being broke in your 80s.

John Bogle, the founder of Vanguard and father of passive investing, says the best way to do this is to not play the loser’s game: short-term market timing.

His answer for the “short timer” syndrome is what he calls a 10-year reasonable expectation time horizon.

In investing terms, 10 years is a lifetime. But this longer time frame takes most of the craziness – the daily ups and downs and all the emotion -out of the equation.

This kind of time horizon reduces the big picture to corporations and how well they do their jobs.

That’s it. According to Bogle, that is investing in a nutshell.

Ordinary investors look at the zigs and zags of the so-called market mavens and think that’s how it’s done, when in reality, it has been proven time and time again that jumping from one idea to the next to beat the market is impossible.

Can you get lucky once in a lifetime? Yes, but that’s about it. Yes, that applies even for the pros.

Bogle calls it “trying too hard,” which causes errors, and errors cost a lot.

How do you win?

Be consistent.

Avoid zigzagging.

Learn market discipline and the fact that day-to-day fluctuations mean nothing.

Rebalance faithfully.

And give compounding the opportunity to work for you.

When we were younger, we had time to correct our mistakes. But most of us are out of time, or at least running very low. Take a serious look at the last 10 years and learn from your mistakes.

And if you haven’t already done it: Get on the 10-year time-horizon wagon.

Good investing,



Source: Wealthy Retirement