There is currently a large debate going on in investing circles: whether investors are actually able to be above average at investing. RewardBus doesn't want to weigh in on whether anybody is above average, we are just fairly sure that we are not above average. If we were, however, we probably would not hand off our secrets to people (without a catchy "14 Things The Finance Industry Doesn't Want You To Know!" headline and a $250 seminar to buy our book!). To be far above average, people on both sides of the argument agree, takes a lot of time, discipline and an innate knowledge of markets. If you feel this describes you well, then this is probably not the place for you. If you feel either overwhelmed by the market or simply not confident in being able to spend the time or effort, then perhaps RewardBus can help.

Know What You Are Investing For

I have been approached before with the generic question "What should I invest in?" This question is almost meaningless to ask and nearly impossible to answer. Different preferences for risk and the purpose of the investing makes a simple recommendation nearly impossible. Also, the confidence level of my recommendation would be fairly wide, which makes me feel uncomfortable making a definitive case with other people's money. I am confident, however, in explaining investing principles, attitudes and implementation. The specifics of what exactly to invest in may be left up to individual advisors (robo-advisors are recommended at RewardBus) but the feelings, implementations and usage of it are possible to control.

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The most important variable for understanding your investing needs is time. To illustrate the point, consider the following two examples: you need to invest to pay your child's tuition in nine months or you are saving for retirement twenty years in the future. When you make an investment, you are stating with your money that you feel that this investment will be worth more at some point in the future. You are not entirely sure when it will happen, but are confident that it will give you a return. When you are forced to sell in nine months, you may have eventually been correct in your bet but forced to sell early. You are able to be more risky when the timeframe is farther in the future (because you are less concerned with how it is doing on a 3-, 6-, or 12-month timeframe).

Set a Gameplan and Stick to It

We advocate for "modern portfolio theory", which involves knowing your risk level and then acquiring a diversified portfolio to accomodate your risk. This means you will not get the wild highs or lows of picking individual stocks but you can partake in general market trends. The advantages to this is that you will, by definition, perform about market average. Considering there are more options of very, very low fee funds that provide this, you will actually probably perform slightly above average. Considering you are spending very little time, this is great! You beat more than half of the people who are spending all their time researching how to beat you! The fastest way to ruin your return is to change your gameplan in the middle. Switching allocations because of some news story or gut feeling/anxiety is a surefire way to make ungrounded decisions (some of which may, by luck, turn out to be right!) Stick to the gameplan and thank yourself later.

Understand What Risk Really Means

Research has consistently shown, time and time again, that investors overreact to market events. When the economy is dour and the stock market is low (and trending down), investors sell their stock and flee toward the sidelines. When the economy has picked up again, people are more confident and bring more money to the table to catch the rising balloon of a market. This is usually the exact opposite of the strategy you should pursue: buying high and selling low is a surefire way to diminish your returns. Also, those who do beat the stock market are just as likely to lose to the average as they are to beat it over the next timeframe. When you set your risk saying that you have a significant portion of stock, you are saying that you are comfortable with the dollar value decreasing 35%, 40%, even 50% in a single year! Think about that for a second - if you are uncomfortable with that (on a short timeframe), make sure you have other options in your portfolio to allow you to earn some money with a little less risk.

RewardBus has some very high level articles written on investing to help you out, especially around the tricky definitions and words that are thrown around: