Mutual funds provide broad diversification among stocks and/or bonds. Invest in those that have a good reputation, historical re-turns that match or beat the market, and that have a low expense ratio (less than one-half of one percent). Checking data is less difficult for mutual funds than for any other type of investment. The Securities & Exchange Commission and/or your state securi-ties regulator can let you know if the brokerage house and par-ticular funds offered are reputable. A prospectus for potential in-vestors should be available for each fund that displays one-year, five-year, ten-year, and lifetime average annual returns, the ex-pense ratio, and other information to help you determine if it is suitable for your investment portfolio.
An equal proportion of large, medium, and small cap no-load low-expense index mutual funds whose past returns track with those particular portions of the market is usually a great choice for one’s portfolio. Together they will provide you with a long-term average annual return that is commensurate with overall stock market returns for these categories of businesses. We became wealthy utilizing an allocation that is approximately 75% stock mutual funds and 25% bond / fixed income / real estate mutual funds. Every year, we make sure our funds returns are commensurate with returns of the appropriate index and have found the ones available to us have met that standard.
Past returns are no guarantee of future returns and you may from time to time lose money. Yet, long-term historical returns for the market, its sectors, and particular funds are one of the best indicators of what is likely to happen over the long-term (especially for index funds of which the portfolio array and management objectives remain the same year upon year). History has shown that the broad stock market has experienced growth in every twenty consecutive year holding pattern, in the vast majority of 10-year holding patterns, that growth is produced in more than three out of every four calendar years, and eighteen months is roughly the average length of time it takes a market downturn to correct itself and go higher than its high before the downturn occurred.
Though funds values are shown based on dollar amounts, it is important to note that you are not investing in dollars, rather you are investing in businesses and the ability of businesses to produce profits, which has been shown to occur throughout history. The purchasing power of a dollar that is only saved at low interest rates decreases based upon the inflation rate. However, average annual stock and bond market returns are five to six times higher than inflation, so the dollar value of the investment greatly appreciates over many years to immunize you against the depreciating effect of inflation. Also, note every other type of vehicle in which you can invest is also measured by a dollar value (or currency in your nation) and, with very few exceptions, they must be converted to dollars (or your national currency) in order to pay mortgages, landlords, grocery stores, farmers markets, car dealerships, and any other merchants.
There are other investment arenas that could lead to wealth but generally a very small proportion of the population experience such effects (usually two percent or less of those who try them). Ownership in businesses and lending for business pursuits (equivalent to stock and bond market investments) has been the top investment arena for building wealth for many generations throughout history and arguably for a far larger proportion of the population (pretty much anyone) who will adhere to long-term (10 years or more), buy-and-hold investing where they do not let emotions (jitters) lead them to buy at high prices and sell at lower prices because of short-term market downturns. Engaging this long-term practice helps discipline you to living below your means and eliminating debt-burden lifestyles, so you can continue the wealth building pattern, and it builds great passive income vehicles from which you can later draw enormous cash flow without having to dip into principle you invested.
There have been many instances where people invested 10% of their income or more during many of their active working years (via this simplistic process), and were able to draw more passive annual income from investments than they earned annually during active working years. Don’t have an eye to get-rich-quick because scripture instructs that steady plodding produces success. Follow the LORD’s instructions to give abundantly, eliminate debt, invest a reasonable portion of His estate entrusted to you, and diversify and your actions will mesh with His desire that you prosper to be a blessing to your family and many others.
Please pray for this ministry, email me with any questions, and contact me to speak at your business or ministry conference or workshop. May the LORD bless you richly as you follow His plan!
Proverbs 11:14, Ecclesiastes 11:2, Matthew 25:14, Luke 19:13
Please forward these bondage-breaking articles to other people who can use helpful insight!
You can find books authored by Randy Parlor and Karen Parlor at
https://www.amazon.com/s?k=Randy+Parlor&i=stripbooks&dc&qid=1573343045&ref=sr_nr_i_1
https://www.amazon.com/s?k=Karen+Parlor&i=stripbooks&ref=nb_sb_noss
You can find many other MoneyWalk articles on Facebook at https://www.facebook.com/randy.parlor by viewing Notes in the More menu on the right side of the computer screen
You can connect with Randy Parlor on
https://twitter.com/RandyParlor
https://www.linkedin.com/in/randyparlor/
You can also view and/or listen to MoneyWalk articles at https://www.youtube.com/channel/UCXnztOIesOKIrSd_H6c-8mQ
No comments:
Post a Comment