1. Compounding is the most powerful force in the Universe
2. The first rule of compounding is to never interrupt it unnecessarily (let it be!)
3. You may think you are capable of this and can invest aggressively and still “let it be” when your every bodily impulse tells you, “DO SOMETHING”! Are you sure that your ability to do nothing exceeds your desire to do something ?
4. When thinking of “aggressive, moderate, or conservative”…. the real question is, what amount of cash / bonds / assets, will allow you to not interrupt your compounding when markets crash? Can you resist tinkering when you see “Markets in Turmoil TV” specials, people posting about their 401K on social media, and billionaires are warning of economic collapse… can you resist that itch?
5. The inverse of that is, “what portion of assets / equities do you need to not suffer from the fear of missing out and the desire to perform better than average”? The index and index investing, is by definition, average.
6. 90% of all money managers & funds, under-perform the benchmark or “average”. Just like the NCAA or Pro Sports, 90% of the points are scored by the top 10% of players. Do you think you are capable of this? Consider that if your financial advisor was able to outperform the “average” consistently, they wouldn’t be working as a “financial advisor”. Ironically, the likelihood of “picking the right money manager” is about the same as the likelihood of “picking the next great stock”. If you insist on doing this, then picking a stock, money manager, or fund are all equally as likely to work.
7. If you don’t know who you are, the stock market is an expensive place to find out.
8. Investing isn’t just about the return on paper. Your tax situation, diversification / ownership of other assets like real estate, rare coin collections, grandfather’s bar of gold buried in an undisclosed location, etc… often matter MORE than investment returns.
9. Financial advisors can have value to you in explaining #7 to you. If they had value in #6, they would not be a financial advisor…they’d be metaphorically dunking a basketball at a trading screen. Thinking otherwise is like thinking that Michael Jordan (or Dimash, or Jay Z, or “insert world class performer”) would prefer to coach rather than play in their prime. Not impossible, but unlikely IMO.
10. Refer to #1, then refer to #2. If information were the answer, we’d all be billionaires with perfect abs (i.e. we all have “the internet”). The discipline is the hard part.