I was waiting for the doctors to tell me it was OK to enter.
A former fighter asked, “Hey Marc! If I want to make some money, where should I invest?” I pointed above his head to the sign that said “Casino.” Then I walked up the stairs and into the cage.[ad#Google Adsense 336×280-IA]In my spare time, I’m a ring announcer for boxing and mixed martial arts. My friends in the fight game know what I do for a living and often pepper me with questions about investing.
This past weekend, the same guy who asked “where should I invest?” came up to me after the fight. He asked me the same question but added some specifics. “Where should I put $5,000 that I want to invest for the long term?”
I asked him how committed he was to investing for the long term. “Would you be OK if the market fell 30% this year?”
He explained that he had an emergency fund in the bank and enough income to meet his monthly bills. “I’m just looking for an investment that I can forget about, then wake up in middle age and have a nest egg.”
“’Forget about’ is a good way to put it,” I said.
I explained that Fidelity studied its hundreds of thousands of accounts – and the best performers were the ones where the investor had either died or forgotten they owned the account.
In other words, investing for the long term works.
I’m not licensed to give personal investment advice. But I explained to him the advantages of owning things like an S&P 500 index fund… diversifying across funds like the ones in Alexander Green’s Gone Fishin’ Portfolio… and investing in Perpetual Dividend Raisers (companies that raise their dividends every year).
From 2003 to 2015, the Vanguard 500 Index Fund (Nasdaq: VFINX) returned 171.09% or 7.97% annualized.
The Gone Fishin’ Portfolio performed better, returning 178.16% or 8.19% annually.
And an index of Perpetual Dividend Raisers (created by The Oxford Club) returned 216.78% or 10.75% annually.
So someone investing $5,000 – as my buddy wanted to – would have finished with $8,554 just putting it into the index fund. In the Gone Fishin’ Portfolio, it would have turned into $8,908. And Perpetual Dividend Raisers would have yielded $10,839.
All of those figures far outpace inflation… $5,000 worth of goods and services in 2003 cost $6,549 today. So any one of these three long-term investment strategies increases an investor’s buying power significantly.
Do keep in mind that although an investor would have made more money in Perpetual Dividend Raisers, that is a 100% stock portfolio. The Gone Fishin’ Portfolio includes other asset classes – such as bonds and precious metals – to reduce risk and help it weather bear markets.
Personally, I have retirement funds invested in both Perpetual Dividend Raisers and the Gone Fishin’ Portfolio.
Perpetual Dividend Raisers include stocks like AT&T (NYSE: T) and 3M Company (NYSE: MMM). These companies have raised their dividends every year for the past 32 and 58 years, respectively.
They may not always be the most exciting companies. But if you can get a Perpetual Dividend Raiser with a decent starting yield, reinvest the dividend and “forget” about it for a decade or more, you’ll do very well.
No matter which investment strategy you choose, don’t overtrade it. Be sure you can leave the money invested for the long term – no matter what the markets do or how panicky you may feel.
Markets go up over the long term, period. Any of these three strategies will help you achieve your long-term financial goals.
Source: Investment U