Let’s
face it, the human eye is a miraculous creation, but
it is quite limited when compared with the technological
advancements that science has brought forth over the
decades to deliver stronger and greater distance vision
with far less vulnerability to human error. Think about
it, dark and cloudy skies or fog as thick as pea soup
would be daunting struggles, creating incredible risk
for pilots who lack the benefit of autopilot. The advancements
are within your reach. It just doesn’t make any
sense to not use them to your advantage.
The same holds true for investing. Over the last 100
years, and especially in the last two decades, scientific
research has given us incredible vision for anticipating
long-term results for our investments. Economic minds
have isolated the specific risk traits that are responsible
for more than 90% of all stock market returns. They have
also uncovered the risks that offer no increased reward,
but just add more risk. This is important to know. Investing
in individual stocks on a tip from a friend, colleague
or TV personality is really the same thing as trying
to land your plane when you don’t even know where
the runway is. You wouldn’t take that risk in an
airplane, so why would you take that risk with your money?
The good news is that you don’t have to. Eighty
years of historical risk and returns data can do for
your portfolio what autopilot does for your plane. It
offers you your best chance at arriving at your intended
destination and with no unsettling surprises along the
way that would cause you to abort your mission.
Think of a passively managed blend of risk appropriate
index funds as your autopilot for investments. Based
on 80 years of historical risk and returns data, you
can buy and hold specific blends of indexes that have
shown to maintain a level of risk that is in keeping
with delivering the highest expected returns over the
long haul.
You already know the virtue of a science that enables
you to expand upon human vision when you fly your plane.
The right blend of index funds offers similar vision.
While people can guess at which way a certain stock or
fund may go in the short-term, it is only a random guess.
However, 80 years of solid information offer you a much
greater probability or vision of what the long-term outcome
will be.
Preparing for Take-off with Index Funds
The first step toward getting started with the Index
portfolio for you is to first identify your Risk Capacity—a
number that is based on 5 specific elements that are
unique to you. They are:
- Your time horizon and liquidity needs
- Net assets
- Net income
- Investing knowledge
- Attitude about risk
These 5 elements are analyzed to determine which Index
portfolio matches your Risk Capacity. The best Index
portfolio for you is the one that you can stay on autopilot
with for the longest time. It’s that simple. The
science has shown us the way. You just have to get on
board.
|
