Summary Sunday is a weekly post where I put out a short list of the personal finance blog posts and articles I liked the most throughout the previous week. Links to each post are in the headers. I hope you enjoy them too!
Today’s Summary Sunday has a theme, one you’ll see again on Wednesday when I reveal my Shameful Investing Secret (that I’m not at all ashamed about). Don’t worry, it won’t be a repeat of today’s posts. My investing secret is related, but very different.
Transitioning from a Saver to an Aggressive Investor
Millennial Money Man – May 19, 2017
I feel like this is a little awkward to talk about because I’m a personal finance blogger, but in the interest of transparency – I’ve spent the last two years being more timid than I should about investing for the future.”
The #1 most important step in investing is getting started. Sure, you need to consider whether you want to pick individual stocks (no) or use index funds (yes) or lifecycle funds (also yes). But you need to avoid getting stuck in analysis paralysis. If you aren’t investing at all because you can’t figure out the exact perfect investment, you are missing out on precious time.
In this post M$M (that’s his moniker) talks about how he is going to increase his risk taking with his investments. If you’ve been putting investing off out of fear, or if you are investing but aren’t seeing the results you want, check this out.
There’s No Such Thing As a Risk-Free Life
Our Next Life – May 17, 2017
Investment banks categorize funds by level of risk, but it’s all an illusion. What they don’t tell you is that by investing in the least risky plans — the “safe” ones — you are increasing your risk of not beating inflation. Which is the exact same thing as losing money over the long term. What they really should ask you, instead of assessing your “risk tolerance,” is What type of risk would you prefer? And then you could choose based on whether you’d rather take on volatility risk or inflationary risk. But you’d know it’s not a yes/no question. It’s either/or.”
Speaking of being afraid to invest, this is the story of how Ms. ONL realized that by choosing “safe” investments, she was taking on the risk of having her money not beat inflation. This is a very real risk. Whenever people say they are keeping their money “safe” in a checking account or CD, I cringe. It’s safe from market crashes and the dollar amount won’t go down…sure. But the value goes down over time as inflation weakens the purchasing power. I really like how Ms. ONL lays out these concepts and makes it clear that there is no safe answer. There are simply different types of risk. Which one are you willing to take?
A new way to invest: Dollar Value Averaging
FIRE by Thirty-Five – May 19, 2017
Investing seems like a big scary monster when you haven’t done it before. The idea of throwing in your hard earned cash and then crossing your fingers and toes that the next market crash isn’t around the corner is enough to give anyone goosebumps. But there are a few tried and true methods to mitigate some of that risk.”
Finally, here is an outline of two methods that can (hopefully) help you overcome a fear of investing. If getting started is the most important step in investing, then the #2 step is to continue investing consistently.
Dollar value averaging isn’t really a new concept. But unless you are very familiar with investing, it is probably new to you! I’m all about simplicity and predictability, so personally I dollar cost average. But if you are willing to put in just a bit more work, dollar value averaging may be the right choice for you. The most important piece is that you just start investing as soon as you can, and then follow up regularly.
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