Playing It Safe
GROWING UP, my older brother beat me in just about every sporting match we played. Basketball, football, tennis���it was remarkable.
I noticed his key to winning was avoiding mistakes. Take tennis. My brother would casually return a soft lob over the net to avoid an unforced error. Meanwhile, I���d pretend I was Andy Roddick and go for the forehand winner every chance I got. My brother would simply watch as my aggressive shot landed outside the lines. Sure, I won now and then. But I shudder to think what my winning percentage was.
My brother���s strategy in sports���trying not to lose rather than trying to win���applies equally well to building wealth, as Charley Ellis notes in his bestselling book, Winning the Loser���s Game. It���s best to stick with tried-and-true methods. Invest automatically in your 401(k) and Roth IRA. Buy low-cost, diversified funds.
Admittedly, it���s easy to get bored with this approach amid today���s frenzied world of social media and nonstop financial TV. If you���re so inclined, you might try for a few high-risk winners with a small part of your portfolio. But realize that���s more likely to hurt your investment performance than help it.
Considering a high-risk strategy? Thinking about buying exotic alternative investments? The reality is, you���re much better off playing the percentages with plain-vanilla, low-cost stock and bond funds���because that���s the road that���s most likely to lead to long-term grand slam investment results.
I noticed his key to winning was avoiding mistakes. Take tennis. My brother would casually return a soft lob over the net to avoid an unforced error. Meanwhile, I���d pretend I was Andy Roddick and go for the forehand winner every chance I got. My brother would simply watch as my aggressive shot landed outside the lines. Sure, I won now and then. But I shudder to think what my winning percentage was.
My brother���s strategy in sports���trying not to lose rather than trying to win���applies equally well to building wealth, as Charley Ellis notes in his bestselling book, Winning the Loser���s Game. It���s best to stick with tried-and-true methods. Invest automatically in your 401(k) and Roth IRA. Buy low-cost, diversified funds.
Admittedly, it���s easy to get bored with this approach amid today���s frenzied world of social media and nonstop financial TV. If you���re so inclined, you might try for a few high-risk winners with a small part of your portfolio. But realize that���s more likely to hurt your investment performance than help it.
Considering a high-risk strategy? Thinking about buying exotic alternative investments? The reality is, you���re much better off playing the percentages with plain-vanilla, low-cost stock and bond funds���because that���s the road that���s most likely to lead to long-term grand slam investment results.
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