We had triumphs—fat markets in the 1990s when we often made 20 percent or more a year—and we had some disasters, the first decade of this century when some people told us we were idiots for investing. Overall, we made a little more than nine percent a year over the long term. That is what I set out to do; earn the long-term market return.

I wasn’t trying to get outrageously high returns—say 20 percent a year—because the risks one would take to achieve it would sometimes mean you end up losing 20 percent. I haven’t tried to hit home-runs every time at bat because home-run hitters often strike out. I’m happy to hit a lot of singles.

However, it was still a rocky ride, one in which were we sometimes tempted to turn back.

Luckily, at the outset, we realized a truth: the sensible investor doesn’t expect to become rich overnight. That’s for those poor souls who plan on winning big in Vegas, or at any of the thousands of casinos that are sprouting up everywhere like venereal diseases that can’t be contained.

Government Enterprise?

These casinos are actually supported by many pols as a form of economic development. That idea would be comical if it wasn’t tragic. And remember, the casino scam is a place where the house has every advantage and no one advertises your odds against winning big.

Once, when I was doing a story on the low profit rates of many New York state casinos—they raise a lot of money but net relatively little for the state after they have paid all the expenses of this system—I asked a state official about the social problems caused by the government becoming some prominently involved in gambling as well as the low profit rates of these casinos. This official, who I interviewed for the story I was doing on state gambling businesses, explained to me the government’s ultimate, and pathetic, justification: “Look at all the jobs they provide.”

Yes, but they also lead some people to think that a trip to Vegas or Atlantic City will solve all their money problems forever.

Get Rich Slowly

Avoid the get rich mentality of the casino. A long-term investment plan means patience. The MoneySense investor is putting money into good investments on a systematic basis—every month, every pay period or every week. He is ready to do this for 10, 20 or perhaps 30 years. That depends on how much he or she needs to achieve financial independence.

Still, the MoneySense investor is the tortoise, not the hare. The MoneySense investor is happy to make steady progress. This person understands that it is better to light a candle than curse the darkness. That’s because the latter screams and hollers, but accomplishes nothing.

The former course starts one toward the achievement of a long-term goal, even if it is only the first steps.

So, focus on regularly putting money into good investments. We’ll see later these include low-cost index funds. And it doesn’t matter that you start with small amounts. What matters is that you start as soon as possible—tomorrow or, better yet, today or yesterday if you have a time machine handy—and that one sticks to a long-term strategy.

That means put money into funds in good times and bad times, especially the latter. That’s when one can buy shares of some excellent stocks or bonds at bargain prices. These are shares that will likely later become profitable when markets recover.

And sign up with the mutual fund company—a good one that has low expense funds that consistently do well, but never shoot the lights out. Vanguard is one. There are other fund companies that can help. Don’t look for a fund that has just had the best performing fund numbers because the next year it will often be a dog.

Don’t Overpay

In sports terms, it’s almost the same as signing a player to a long-term contract just after he or she has had the greatest year in a career. You’re paying for a performance level the player or the fund will likely never duplicate.

Look for a fund or fund family that consistently does well, not fabulously, over a five year or a ten-year period. Fabulous returns, especially in the short term, frequently are the result of luck or a fund manager taking a big chance one year and hitting a home-run (For more on this, please see a later chapter on how this year’s big winner often become next year’s bow wows). Often those factors will reverse the next year and the fund will go from best to worst.

Want an example?

Look up the history of the roller-coaster American Heritage fund run by manager Heiko Thieme. I once met him at a conference. Thieme was an electrifying speaker, but I’m glad I looked beyond his considerable charisma in investing my own money.

Indeed, the American Heritage fund hooked lots of investors who did poorly because they bought the fund just after it had a fabulous year. His fund was incredibly volatile. He would have a great year every once in a while—maybe up close to 100 percent. Then he would advertise these numbers to the hilt and bring in lots of new investors. They thought they were also going to get 100 percent. They didn’t. Then the next three years the fund was egregious.

Investors wondered what happened. He was the free agent in sports who sells himself just after he has a fabulous year and everyone starts bidding on him. He gets a long-term contract. He never hits those peaks again. So what the MoneySense investor wants is primarily skill. We’ll discuss this in our next segment.

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Gregory Bresiger
Gregory Bresiger

Gregory Bresiger is an independent financial journalist from Queens, New York. His articles have appeared in publications such as Financial Planner Magazine and The New York Post.