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3 Investing Lessons From Dad Jokes

By Dave Kovaleski - Jun 20, 2021 at 5:15AM

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Because while you canʻt teach funny, you can impart some solid investing advice this Fatherʻs Day.

At some point along the way, the vast encyclopedia of corny jokes handed down through the ages became dad jokes. But hey, who's complaining -- you know you love them. Or at least get a mild chuckle out of them. Or tolerate them. Or not. You know, like, what does a baby computer call his father? Data.

As this is Fatherʻs Day, we thought that in honor of all the stand-up dads out there who secretly wish they were Jimmy Kimmel, weʻd take some of these dad jokes and spin them into pearls of investing wisdom.

Because, as they say, knowledge is knowing tomatoes are fruit, but wisdom is knowing not to put tomatoes in a fruit salad.

A dad with his daughter and pet dog. They are all wearing bows in their hair and smiling.

Image source: Getty Images.

What should the Terminator be called in retirement?

The ex-terminator.

Whether your job was traveling through time and space to terminate future revolutionaries or working in a bank, you'll obviously need more than Social Security to live on when you retire. But the question is: How much will you need? There are some basic formulas you can use to come up with a ballpark figure.

One is that you should have 10 times your final year's salary in retirement savings. So, project a 2% annual salary increase from where you are now and that will give you a sense of your salary when you are say, 67. If it is $75,000, then you'll need about $750,000 for a comfortable retirement through your various savings vehicles, whether it is an employer-sponsored plan, an IRA, or investments.

You could also do it by household income, combining what you and your spouse make. There are other measures as well, but this is a simple and pretty effective one. Doing this calculation will help you develop the right investment strategy to get you where you need to go.

What do sprinters eat before a race?

Nothing, they fast.

But investing is a marathon, not a sprint, so a long-term focus is essential to being a successful investor.

The past year or so has been a terrific lesson in the importance of keeping a long-term outlook for your investments. Last March, in a span of about a month, the market tanked about 33%, as the S&P 500 plunged to a low of 2,247 on March 23.

This was obviously brought on by a once in a century occurrence, a pandemic that sent the nation into recession and the markets into a tailspin. If you sold there at the bottom, like many people did, you not only locked in those paper losses, but you lost out on the recovery.

As of Friday, June 18, the S&P 500 was well over 4,200 -- up about 90% from the March 2020 lows and up about 25% from the pre-pandemic high of 3,386 on Feb. 19, 2020.

Over the long run, the stock market has weathered the ups and downs to produce double-digit annual gains on average. The S&P 500 has posted about a 10% annual return going back to its inception in 1926.

Trying to time the market rarely works for the average investor -- just think about the investors who sold Amazon at any point over the last 20 years to "cash in." They left a lot of money on the table.

I can't tell if I like this blender...

It keeps giving me mixed results.

Mixed results in investing is not a bad thing. In fact, it could be called a basic tenet of investing -- diversification.

Diversification, brings balance to your portfolio, as a wide variety investments helps reduce the risk that comes with having too much at stake in one stock. Instead, your portfolio is balanced with investments that perform well in different market cycles. Ultimately, a well-diversified portfolio will generate better returns over the long run.

Your portfolio can be diversified in several different ways. One way is by asset type, with a mix of stocks, bonds, and cash investments.

Another way is to diversify within an asset type by having a mix of growth and value stocks, aggressive and low-volatility stocks, and different sectors of industries that perform differently in various market cycles.

An easy way to obtain diversification in a single investment is through an exchange-traded fund (ETF). ETFs track the performance of indexes, so you can invest in ETFs that track wide swaths of the market for ultimate diversification, or track the various subsections of it.

So, to all the dads out there, here's one last thing to consider:

Do you know when a joke becomes a dad joke? When it becomes apparent. Happy Father's Day!

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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