Save More and Keep Investing for the Long Term: The 20 Most Important Money Ideas for You in 2020

[Save more money and insist on long-term investment, these are the 20 most important money concepts for you in 2020] CLEC Investment and Financial Management Education Channel Blog date: January 15, 2020

The following is an excerpt from the article below and my personal opinion:

Quickly write it down: save more money and insist on long-term investment. These are the 20 most important money concepts for you in 2020! -Feng Media

https://www.storm.mg/article/2128494

(1) Be humble when facing the market. Don’t think that you can grasp the pulse of the market. Otherwise, the market will eventually make you realize this and make you pay a heavy price.

Many people believe that they can judge the rise and fall of the market, which leads to frequent transactions and ultimately poor investment performance.

(2) There is no such thing as a free lunch. High rewards must be accompanied by high risks. Things that seem too good are usually fake.

When an investment performance seems so perfect, you have to suspect that it is a fraud group. When the return rate of an investment product is said to be guaranteed, you have to suspect that it is also a scam.

(3) The longer you hold your investment, the higher your chance of investment success.

As shown in the attached picture (1)

(4) Every market is different. Don’t use past experience to predict future development.

Because the stock market may not have any rules at all.

(5) Price targets are completely meaningless and predicting stock prices is stupid.

At the end of each year, countless financial institutions will publish their economic and stock price forecasts for the coming year. Although such forecasts are not only extremely accurate, they are even harmful to investors!

(6) Plans are better than predictions, and evidence is better than comments.

In November 2016, the United States entered an important presidential election. Before the election, all major media (even the president of Taiwan's central bank) predicted that if Trump was elected, the global stock market would plummet. What was the result? The U.S. stock market only fell for one day before starting to rise. So far since Trump was elected, the U.S. S&P 500 index has risen by 60% and the Nasdaq 100 index has risen by 86%. Don’t let such predictions hinder your investment plans!

(7) It is normal for the stock market to fall. If you want to invest successfully, you need to adapt to the decline of the stock market instead of leaving the stock market, because you will not know when the decline will occur? How much will it fall?

The same should be true for investment. It is inevitable to encounter turbulence. Wait patiently for it to pass instead of jumping out of the plane!

(8) Investing in a single stock is a good way to accumulate wealth quickly, but it is also a good way to lose wealth quickly.

Unless you are very clear about the company's business model and are 100% confident, you can invest a little bit. What is a little bit, less than 5% of the investment assets at that time.

You can invest in up to four to six stocks, and the total funds invested in individual stocks should not exceed 30% of your investment assets. And after buying, you must live and die with the company and hold on to it forever. Without such determination, never buy individual stocks.

(9) The financial market is full of high uncertainty, and any situation you cannot imagine may happen.

Investment does not worry about normal conditions. The real risk of investment is that an event with a very low probability of occurrence suddenly occurs. This is something that no one can predict or avoid in advance, so what you have to do is asset allocation.Facing the uncertainty of the market, we have to face it with asset allocation. Generally, I recommend that people who are still working and earning an income should set aside half a year to a year's living expenses. People who have retired and have no salary income should set aside two to three years' living expenses to guard against future uncertainties.

(10) To accumulate wealth, "time" is far more important than money

Both money and time are important, but time is fair and money varies from person to person, so the best thing you can do is save money and accumulate assets as much as you can. Regardless of your income and capital, making the effort to save money will make you a more successful and wealthy investor. Investment success or failure has nothing to do with your income. It has to do with how hard you save. The next step is to stick to long-term investment.

The most valuable asset young people have is time. If young people do not know how to master this precious advantage, it will be difficult for the younger generation to accumulate wealth.

(11) Saving more money is more important than investment return rate

As shown in the attached picture (click on the chart to see the full picture) (2)

A person who saves 1% every year and gets a return of 8% has lower assets than someone who saves 8% a year and gets a return of 1%. This is an extreme example, and the focus should be on saving money diligently.

Saving as much money as possible is the cornerstone of successfully building wealth.

(12) Generally speaking, funds with low expense ratios will perform better than funds with high expense ratios. Generally speaking, passive funds will perform better than active funds. Generally speaking, products with simple structures will perform better than products with complex structures.

(13) Choose an investment method that suits you and stick to it even if the short-term performance is poor. This is an important key to investment success.

Before deciding on your investment method, you must study it clearly. Regarding the risk and return rate of your investment method, investors often do not study it clearly. When they hear the recommendations of financial specialists and insurance brokers, they think it is a good investment. When you make the wrong investment decision, persistence is useless and will not bring you good results.

Once you have researched clearly, know the long-term rate of return, and decided on your investment method, the next thing is to stick to it.

When I see that the method I originally chose seems to be performing poorly for a period of time, I start to think about investing in another way. The result will definitely not be good.

Being able to tolerate short-term "failure" is a very important factor in Buffett's success.

(14) Once a portfolio is set up, it is often better to leave it unchanged (or change it rarely) than to change it frequently.

In fact, often the most correct approach is to do nothing.

There is an inverse relationship between investment performance and the number of transactions, that is, the fewer investors trade, the better the performance will be!

As shown in the attached picture: Those with high returns are rarely operated. (Click on the chart to see the full picture) (3)

(15)Don’t be afraid to say “I don’t know”

Successful investors start on the road to successful investing only after they start saying "I don't know."

Because only by admitting that you don’t know can you take the right approach.

(16)Regression to the mean is a very important characteristic of financial markets

If it rises too much, it will fall, and if it falls too much, it will rise back. This characteristic of returning to the mean is the unchanging law of the financial market!

The characteristics of the market are exactly the opposite of what ordinary investors think. Generally, investors believe that when it rises, it will continue to rise. When the market falls, they think that the market will definitely continue to fall.(17) No one has any scientific method to accurately predict the high point or low point of the market. All these predictions are just personal guesses.

While all governments are cracking down on false information on the Internet, the predictions of investment companies, investment banks, and analysts have been proven to be wrong or inaccurate, but no government is seen cracking down on this kind of misinformation.

(18) The best investment strategy is not to choose the product with the highest return on investment, but the product that allows you to hold it for a long time and enjoy the benefits of "compound interest"

The returns from investment products will never be equal to the returns from investors. Only products that allow you to hold them for a long time are the products you should own!

(19) Risk-diversified investment portfolios and asset allocation are the best investment strategies to protect ourselves when we cannot predict market trends.

As we mentioned earlier, the ratio of cash, short-term bonds, and stock indexes is your asset allocation to protect against unpredictable risks in the future.

(20)Learn to control your emotions, otherwise your emotions will control you

Einstein once said: The three greatest forces in the world are stupidity, fear and greed. Buffett has repeatedly reminded us that the key factor for investment success is not intelligence, but the ability to control one's emotions.

When you are tempted to make an investment decision impulsively (whether due to fear or greed), it is recommended that you pause first.