- Budgeting
- Cash Management
- Consumer and Mortgage Loans
- Debt and Debt Reduction
- Time Value of Money 1: Present and Future Value
- Time Value of Money 2: Inflation, Real Returns, Annuities, and Amortized Loans
- Insurance 1: Basics
- Insurance 2: Life Insurance
- Insurance 3: Health, Long-term Care, and Disability Insurance
- Insurance 4: Auto, Homeowners, and Liability Insurance
- The Home Decision
- The Auto Decision
- Family 1: Money and Marriage
- Family 2: Teaching Children Financial Responsibility
- Family 3: Financing Children’s Education and Missions
- Investments A: Key Lessons of Investing
- Introduction
- Recognize the Ten Principles of Successful Investing
- Principle 1: Know Yourself
- Principle 2: Understand Risk
- Principle 3: Stay Diversified
- Principle 4: Invest Low-Cost and Tax-Efficiently
- Principle 5: Invest for the Long Run
- Principle 6: Use Caution If You Are Investing in Individual Assets
- Principle 7: Monitor Portfolio Performance Against Benchmarks
- Principle 8: Do Not Waste Too Much Time and Energy Trying to Beat the Market
- Principle 9: Invest Only with High-Quality, Licensed, Reputable People and Institutions
- Principle 10: Develop a Good Investment Plan and Follow It Closely
- Lessons Learned
- Understand the Investment Hourglass
- Summary
- Assignments
- Investments B: Key Lessons of Investing
Principle 5: Invest for the Long Run
Invest for the long run: this is how you will achieve your goals. Invest wisely: there are no “get-rich-quick” schemes that work, and short-term investing is expensive in terms of time, transaction costs, and taxes.
Avoid short-term trading. Short-term trading is expensive and incurs transactions costs and taxes. Keep at least part of your funds in the market for the long run. Keep in mind that taking money out of the market, as well as discontinuing saving, may not only slow your progress but could stop it altogether. A recent study found that those who traded more often, using the turnover ratio as a proxy for trading, had lower returns than those who traded less often and used a buy and hold strategy (see Chart 1). (Carla Fried, “The Problem with your Investment Approach,” Business 2.0, November 2003, 146).
Chart 1
