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If You Ask This Question, You're Jeopardizing Your RetirementBy
Friday, May 13, 2016
It's the question I dread.
But when I'm asked, I've learned to breathe deep and smile...
When people find out I've been producing my own wine... they often ask for a bottle.
When I mention my medical career... they show me their rash or ask for my opinion about some injury they suffered.
And when they learn about my experience in finance... they always ask the same question...
"What should I buy today?"
I'm not alone, of course. Nobody on Wall Street likes that question. It's not that we mind sharing our ideas... Trust me, Wall Street folks are more than happy to tell you how smart we are. And it's not that we're trying to hoard our top ideas. If anything... Once a trader establishes a position, it helps him to get other people excited about the same idea.
The reason we hate that question is there's no good answer... How can I (or anyone) answer without knowing your goals or risk tolerance? Without the answers to those questions (and a dozen others), my response is almost irrelevant.
Essentially, these people are really asking: "Hey, how can I make a lot of money fast?"
They don't usually care about why I'd recommend a certain investment, or if those reasons make sense for them. They just want to know which way they should push their chips to make a pile of dough.
This is a gambler's mentality, and it's a great way to jeopardize your retirement.
Smart investors think more broadly. They consider risks and goals. They understand the perfect investment for a 25-year-old could be terrible for a 70-year-old... and vice versa.
If a smart investor were to look for the perfect, one-size-fits-all investment, what would he look for? We've settled on three criteria:
First, we need a simple way to determine the highest-quality businesses. We need something that makes logical sense and has stood the test of time. It needs to lead us to unquestionably good investments with a rule that can be explained in one or two sentences.
Second, we want diversification. Any single stock can be a buy at some times and a sell at others. The perfect investment is a permanent buy. You only get that with a diversified basket of stocks. The need for diversification means we're looking for some sort of investment fund.
That leads to our third criterion: low fees. We don't want to erode our earnings with high fees each year. Since we have a simple rule that picks our stocks, we don't need to pay a professional money manager a high fee to handle the process. Rather, we want to buy in for a low commission and pay out only a tiny percentage in annual fees.
If you keep these three criteria in mind, you're sure to improve your investing results... regardless of whether you're younger or older... working or retired... or a novice or a veteran in the markets.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig
Further Reading:
Regardless of your investment goals or risk tolerance, Doc has found the "perfect" investment that combines the safety of bonds with the upside of stocks. Get the details here.
In March, Doc shared three keys to surviving any market environment. "This idea is crucial to your long-term success as an investor," he writes. Read more here: The Three Principles of Consistent Wealth-Building.
Market NotesTHIS DINING PICKS-AND-SHOVELS COMPANY IS SOARING More and more people around the globe are eating out... and shares of the world's largest food-service business are soaring.
Regular DailyWealth readers are familiar with using "picks and shovels" companies to profit from sector and commodity booms. These companies don't bet the farm on a single project. Instead, they sell vital goods and services to an industry. (You can read our educational interview on the subject here.)
One great example is Sysco (SYY), which serves more than 400,000 clients in the restaurant and hospitality industries. Sysco supplies almost everything a restaurant needs – everything from food, beverages, and condiments, to napkins and cups. That makes the stock a great gauge of what's going on in the restaurant business.
As you can see below, the trend is up... and not showing any signs of slowing. Shares of Sysco are up 56% over the past three years – and just broke out to a new all-time high. It's boom times for this untraditional picks-and-shovels firm...
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