WITH THOUSANDS OF investments and zillions of competing strategies vying for investors' allegiance, it can be tempting to fall back on a few simple rules of thumb. Such often-repeated and seemingly time-proven investing axioms are valuable because they "give people a basis to get started investing" and on a path to improved long-term financial security, says Kathy Carey, who is director of private wealth management research for investment firm Baird.
But just like simplistic medical advice, these bromides don't help all people in all situations. Chicken soup has many curative properties, but isn't a fix for a broken leg, after all. And in many cases, following some investing prescriptions without adjusting for your own circumstances could end up damaging your returns, Carey says.
To help you personalize the maxims and maximize your returns, consider the nuances of some oft-quoted adages.
DOLLAR-COST AVERAGE
More than 70 years ago, investing great Benjamin Graham recommended that investors make regular contributions to their investment funds so that the overall price they ended up paying for each holding would be the average of its price over many ups and downs and not the (possibly high) price on any one day.
Research has since found that those with a lump sum to invest would, on average, earn higher returns over the long haul by dumping it in all at once. A 2019 study by research firm Morningstar found that going back to 1926, lump-summers would have beaten dollar-cost averages over 10-year periods in more than 90% of the cases. The main exception: investors plonking down their lump sum at the start of a bear market.
This story is from the April 2023 edition of Kiplinger's Personal Finance.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the April 2023 edition of Kiplinger's Personal Finance.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Sign In
A SOLID YEAR FOR THE KIPLINGER 25
All but one of our favorite actively managed, no-load mutual funds gained ground as markets recovered.
YOUR VACATION HOME COULD PROVIDE TAX-FREE INCOME
If you plan to rent out your vacation home, it's important to understand how your proceeds will be taxed.
IT'S NOT YOUR IMAGINATION: YOUR CEREAL BOX IS SHRINKING
To avoid raising prices, some manufacturers are reducing the size of common grocery items. Here’s how to fight back.
SHOULD YOU WORRY ABOUT BEING LAID OFF? IT DEPENDS ON YOUR INDUSTRY
Downsizing has hit certain sectors. But cutbacks may be slowing, and some companies are expanding.
How identity thieves are exploiting your trust
Con artists themselves are disguising as well-known brands to steal your money and personal information.
CUT THE COST OF YOUR WIRELESS BILL
AT&T, T-Mobile and Verizon dominate the market, but smaller outfits offer similar network coverage at lower prices.
MAKING HOME ENERGY MORE AFFORDABLE
Households in need can get energy-efficiency upgrades, help with utility bills and more from this nonprofit.
A HEAD START FOR SAVERS
The Saver's Credit is designed to help low- and middleincome taxpayers contribute to a retirement account.
Say I Love You With a Money Date
To nurture a lasting bond with your partner, meet regularly to talk about money.
Plan for Your Own Elder Care
AFTER I wrote a series of columns in 2022 about elder care planning for family members, I received a number of responses like this one: “What about married couples who have no children or whose family members don’t live nearby?” wrote one reader. “Or a single individual with no close relatives? How should these people plan for their own elder care?”
