[ Warning: This post has very little to do about wine. But, it might just help to make you a millionaire. Your mileage may vary. ]
Back in March, when I let the cat out of the bag on my personal financial situation, I got a lot of interesting reactions. Most of them were of the attah-boy! variety, but since that time there’s been no shortage of questions coming to me in private about it.
Most of those are some variation on the theme: “how the f*ck did you do that?!??”
I am here today to tell you everything that I know about investing. Interestingly, I learned the most important aspects of it from tasting wine, though I am not trying to fool anyone that one will lead to the other in any meaningful way.
The bottom line is that after spending some countless hours delving deep into the pits of wine and tasting knowledge, I emerged in nearly the same place where I began, which is to approach the topic humbly, simply, and with a plan that lets me tune out the “noise” of scores or similar attempts at taste-making / gate-keeping that purport to tell me what is “right” or “wrong” to drink. When it comes to personal satisfaction, 90% of what we see in terms of wine coverage is more or less “wine porn.”
And after spending the last two years delving deep into the pots of investing and finance knowledge, I’ve come to the conclusion that successful investing requires almost exactly the same approach: ignore the porn.
Ah, simplicity, thy name is investing!
Here’s the skinny on how (in my somewhat learned opinion) 90% of those reading this can find success and wealth through investing…
The first disclosure is that I am not a certified financial anything, so you follow any pseudo-advice on finance given here at your own risk. The second disclosure is that I do not work for any financial entities mentioned here. The third disclosure is that I am not going to talk about saving money, which is a prerequisite for investing money so that money makes more money for you; there are only about a quadrillion websites and books on the topic of personal finance and savings, go read one of them (today, we’re assuming you have money to invest).
Here is the formula for wealth, in the simplest steps in which I can break it down:
1. Pick a Vanguard Target Retirement Fund based on your age (or your projected retirement date).
2. Invest your money into that fund, every month, without fail, preferably in a tax-deferred option (401k, IRA, or similar).
3. Ignore all financial news. When the market is going gangbusters, invest in your fund. When the market tanks and people are wailing in The Street, invest in your fund. When the market sits there and does nothing, invest in your fund.
4. When it comes time to retire, open your account. Bring a spare pair of undies, because you will need them when you see how much money you’ve accumulated and you crap yourself (in a good way, I mean).
5. The end, live happily ever after.
Seriously. After reading every classic investing tome, every prominent financial website, and retiring early myself, the above step-by-step formula is almost mathematically guaranteed to put you ahead of anyone trying to “beat the market.”
There are various reasons for this, but the short version of them all is that scientific study on good data by Nobel Prize winning PhDs has verified the detail that went into the simple steps outlined above. You want to side with stock “pickers” like Mad Money Cramer, who still has to work and write books to make a living, or with Nobel-winners? I know where I’m betting my future.
Those same findings mean that you almost certainly do NOT need any of the following to amass wealth (in fact, these people will almost certainly drag down your returns due to their fees):
– a financial planner
– a financial advisor
– a stock broker
– stock picking / analysis software
– stock tips from your Uncle Eddie
– any investment vehicle other than a balanced index fund with the lowest expense ratio/fees possible (that’s were Vanguard comes in to the picture).
Really, that’s all, folks. Go home. When some stock broker cold calls you, hang up on him/her. When your checking account bank calls you about some investment or fund opportunity, hang up on them.
Ok, technically there’s a bit more to it, such as rebalancing from more volatile stocks into less volatile bonds as you get older (to help preserve capital), but Vanguard’s Target Retirement stuff will handle all of that for you. You literally need do nothing with it, other than put money into it without fail, designate a beneficiary in case you croak early, and spend the money on having a great time in retirement when you’re done.
So… to those emailing me about how I “did” it: there’s no secret required to doing this stuff successfully, just the intestinal fortitude to ignore the porn, and stick to your plan. Which ought to be a path already familiar to those of you who are exploring the wine world by reading sites like this one, right?