As Americans, one of our Founding Father-given rights is the pursuit of happiness, yet it seems few of us spend much time exercising it.
But Gretchen Rubin has made the pursuit of happiness one of her chief occupations. An interesting post on her website listed some "quick, common-sense principles people apply to solve a problem or make a decision." As I read them, it struck me that not only would they help many people live more fulfilling lives -- they can also help us manage our money better.
Here they are:
- There's no wrong decision.
- Always say hello.
- People in business, small or large, will take advantage of you if they can.
- What would my mother do?
- Actually, this is good news.
- Say yes.
- This is the fun part.
- Do nothing, go nowhere.
- Do everything all at once.
When I think of investing, it seems there are plenty of wrong decisions. Investing in hot stock tips or borrowing as much as possible on margin, for example, are likely to end up as regrettable decisions. Yet viewed from a different perspective, they could actually be good ones. If you lose $1,000 early in your investing life on a penny stock, for instance, the lesson might serve you well, helping you avoid losing much more later on.
The concept that people in business will try to take advantage of you rings true, if you think of them trying to make money off you. After all, that's what business is -- selling products or services and making a profit from that activity. It can be smart to remind ourselves of that in the financial realm -- for example, when we look at mutual funds, which charge us fees.
Consider the AllianceBernstein Large Cap Growth A (APGAX) fund. You might be impressed that it holds stocks such as Hewlett-Packard
A little more research, though, will reveal that the fund's long-term record underperforms the S&P 500, and that for the privilege of such underperformance, you'll be charged a higher-than-average expense ratio (annual fee) of 1.43%, and perhaps even a 4.25% front load (i.e., an immediate $225 haircut on a $5,000 investment).
Moms are right
Thinking about your mom might seem odd thing in the investing realm, but remember that mothers are often right. Mine was when she told me to sell some of my AOL [now Time Warner
"Actually, this is good news" is another helpful perspective. If the stock market plunges for a while, for example, you might view it positively: It's suddenly offering you gobs of stocks on sale. (Of course, I'd hope you hadn't invested money you'll need in the near future in the stock market. That's not prudent, as anything can happen in the short run.) This perspective, like the others, is also helpful in life. Losing a job can be traumatic and financially excruciating, but it can lead to your finding a better job. So in the long run, the job loss may turn out to have been good news.
"This is the fun part." Remember that when you're struggling to get your four-year-old dressed in the morning. It's difficult and exhausting, but these are, in many ways, some of the best years of your life. Similarly, try to see the fun in investing. Root for your holdings to perform well. Keep watch lists of promising stocks, and see how good your instincts are as they zoom up ... or don't.
"Do nothing, go nowhere." It's so true! I touched on this topic in my article, "Do You Deserve to Be Wealthy?" If you don't set up an IRA and contribute to it regularly, you're not going to end up with a (possibly tax-free) nest egg come retirement. (Learn more in our IRA Center.) If you don't take the time to find some outstanding investments (or at least to move money from underperforming investments into a market-matching index fund), you'll leave thousands (perhaps hundreds of thousands) of dollars on the table.
So do something -- please. Your portfolio will be glad you did.