Slow and Steady Wins The Race

DISCLAIMER - I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions are my own and are not to be used as professional advice. These are my findings and can hopefully help you to make informed decisions on investing. Consult a Broker or Lawyer before making any investment.

SLOW AND STEADY WINS THE RACE

As a child, I was always engrossed in the fable about the tortoise and the hare. As you remember, the hare was super-fast and could run circles around the tortoise. But because he was so fast, he decided to just take it easy and take a little nap. The tortoise just kept on his slow steady pace and passed the sleeping rabbit to win the race.

I believe that we can learn a lesson from the tortoise when it comes to investing. For the past few years, I have been a big proponent of searching out all the ways to supercharge my IRA returns, and most of these have worked out very well.

However, as I reflect on the amount of time it takes to study out all these methods and continue to listen to Dave Ramsey’s podcasts several times a week, I have come to the conclusion that his slow and steady method is really a good plan. Your priority should be to get debt free, and then invest a minimum of 15% of your income each month. If you have not gotten on board with Dave Ramsey’s simple plan to control your money and investing wisely after debt is eliminated, I would urge you to read the book “The Total Money Makeover.” It has changed my life. There are so many myths and lies prevalent in our society that it takes a different mindset to win. And his plans are based on solid biblical principles.

I will invest more of my money into Mutual Funds in the future. Do I intend to stop buying Preferred Stocks, Dividend Stocks, Closed End Funds, and REITs (Real Estate Investment Trusts)? No. I will continue my plan. I certainly don’t intend to stop limiting my losses on stocks and ETFs (stop loss orders) as the market is historically higher than ever before and you can be sure when everyone is telling you “NOW IS THE TIME TO BUY STOCKS”, that some caution is needed.

Warren Buffet once said to “Be fearful when everyone is greedy and buy when everyone is fearful and selling.” So common sense and caution are crucial, particularly as you approach retirement.

I will use mutual funds in a larger part of my portfolio than I have in the past. I am trying to point out that slow and steady investments into solid Growth Mutual Funds will make you rich over time. If you are in your 20’s or 30’s, I think I would just take the easy route and buy into many of the mutual funds just like the Dave Ramsey plan is designed.

Some in Growth (large cap), some in medium growth (Mid-Cap stocks) and some in Aggressive Growth (small cap appreciation), and some in Global/Foreign stocks. If you do that, then each year you can compare your returns on your mutual funds to others in that same group category and move out of those not in the upper 10% on returns.

This is a very simple approach and only takes a few hours a year. On two of my grandchildren, I have invested the majority of their funds in those types of investments, while placing some in dividend growth ETFs, and some on the high return ETFs using Covered Call options along with some REITs. The returns this year have been phenomenal and they have the ability to ride out the ups/downs of the stock market year to year with a 40-year window to retirement.

I put some of their investments in 3 SELECT portfolios at Fidelity that have a return over 30% in specific sectors. Those are FPHAX – Fidelity Select Pharmaceuticals, FSELX – Fidelity Select Semiconductors, and FSPCS – Fidelity Select Insurance. On the large cap Blue chips, the FBGRX – Fidelity Blue Chip Growth fund is also returning over 30% this year.

Will this high rate of return continue? Probably not. But by having some Foreign stocks, mid-cap, and small-caps in the various mutual funds with some sprinkling of Bonds, I think they will do well over time.

I try to read and grow my knowledge on investments each week. In doing that, I spend a lot of time on dividend growth strategies. The more I read, the more I realize that if something sounds too good to be true, most likely it is. Several of the authors I have recently read said that sticking to an organized plan with consistent monthly investment is key to winning the race for a large portfolio at retirement.

People moving money in and out of the market rarely do well. Dave Ramsey said the life of a day trader in the stock market is typically under one year. They tend to get wrapped up in quick returns and lose all their money. A steady average return on the stock market has been above 10% when averaged out historically. Sure, there will be years with a loss, but it will average out in time if you stick with it. You only lose money when you sell a discounted stock or mutual fund.

I suggest using a steady plan. Stay away from anything promising the moon, particularly the high-risk crypto currencies. If you can’t understand an investment, stay away from it. Many people today are losing all their money on scams. Don’t be one of those people seeking super high returns.

Owning shares of public stock companies is the key to making a lot of money. By allowing mutual fund portfolio managers who are professionals to make the decisions on which stocks to buy, you minimize risk. Mutual funds are much, much safer than trying to wing it on your own. It pays off over the years, not in the daily returns. Probably one of the smartest and richest men to ever live, King Solomon, once said that steady investing was the way to go.

Pro 21:5 The thoughts of the diligent tend only to plenteousness; but of every one that is hasty only to want.

Slow and steady wins the portfolio income race. Those that try to get rich quickly rarely win, but he that is slow and steady gains the most over time.

Pro 13:11 Wealth gotten by vanity shall be diminished: but he that gathereth by labour shall increase.

Nathan Winklepeck, Certified Financial Planner, stated in his book “The Dividend Growth Machine”:

Master these 3 decisions, and you’ll be 80% on your way to financial freedom:

1. Spend Less than you make.

2. Invest the surplus in ownership assets (Stocks, ETFs, Mutual Funds)

3. And then do nothing for a long time.

He says to repeat this year after year, and you will achieve wealth regardless of your investment strategy. In other words, follow the simple precepts laid out by Dave Ramsey and get diversified mutual funds and then just roll on with time. Do nothing for a long time as Nathan Winklepeck states in his book. (At most just reorganize yearly to be sure you are on a solid plan.)

Slow and steady is the key element in investing.

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