When I have conversations about money with friends or clients, one of the first things I mention is that I’m not a stock picker. I do this because many people think a financial advisor or investment manager spends most of their time staring at a computer screen of charts, analyzing trends or price to book ratios, and coming up with complex algorithms to outsmart the market and determine the next stock(s) that will outperform all others. While there are certainly people who love to do this sort of analysis and are good at it, most active managers (those who analyze and pick stocks in hopes of outperforming the market) do not beat the typical market indexes (the S&P500, for example.) What is the market after all? It’s the collective bets / guesses of hundreds of thousands of investors with all their “wisdom” as well as their fear and greed. While any one person may be wildly off, the collective intelligence of the many provides a much better signal.
So what’s the best alternative to picking your own stocks or having someone else do it for you? Buying the market as a whole using low-cost index funds or ETFs. By taking this approach you diversify by investing in thousands of US and international companies at a very low expense ratio. You will not have the excitement of identifying the next Apple or Amazon but if you invest regularly over time you’ll have a better chance of hitting your long term goals. This is the “slow money“ approach – not trying to get rich quickly but living within your means and saving and investing regularly. This probably sounds really boring. It is. Investing should not be where you get your thrills. Investing should be a habit, not unlike flossing, that you do because it’s the right thing for the long term, not because it brings you joy or excitement in the moment.
Here’s a link to a great Freakanomics podcast that goes into this in more detail if you’re curious.
So when people ask me what’s the best investment right now I encourage them to consider some timeless investments with potentially priceless dividends:
Invest your time in the people who matter most to you
- Buy some flowers for your spouse or partner.
- Take a hike with your kids or friends. The picture above was taken during a hike with my son. It’s a memory I’ll always treasure.
- Write a card or call an old friend you haven’t spoken with in a long time.
Invest in yourself
- What makes you really happy? Make sure you’re doing something meaningful or joyful every day.
- Get outside! Spend some time in nature as a way to slow down and appreciate the moment.