Think Long Term

The problem a lot of people have with investing is, they focus on short term performance. This is not entirely their fault. Newspapers publish stock and mutual fund performance daily. Magazines report monthly, quarterly and annual results. While these measurements are interesting, they don't tell the full story. How did your stock, mutual fund, or ETF perform over the past 3, 5, and 10 year periods? Do they perform in good and bad markets? How do they compare with their peers? These are some good questions to ask before you buy (or sell) your investment. This brings up another problem for investors. What is the time frame for your investments? Is it just one year? Most likely not. Most people are investing for 10, 20, or 30 years down the road. Even retirees should have some money in the market. The average 65 year old has a very good chance to live to age 85 or longer. That's 20+ years! Twenty years is a long time to be in CD's earning 1-3% which barely keeps up with inflation, and when taxes are factored in, CD's barely make money at all. If you have enough money to live off the income your CD's generate then that's great, don't take the extra risk. But most people need more growth than that. Sure, stocks and mutual funds have risks, but with risk comes reward. The trick is finding the balance!