Becoming Debt Free
After first becoming totally debt free, I felt a huge weight lifted from my shoulders and I thought the journey to wealth accumulation was a downhill journey… but I wasn’t even close to reality!
I figured I’d be able to redirect all the money I use to spend on debt reduction, into the stock market, and blammo, I’d be wealthy! This hasn’t happened and in fact the opposite has happened in that I’m constantly worrying about the stock market. It the first thing check in the morning, during the day, and it’s the last think I typically review before I go to sleep. It’s all-consuming for me, and becoming quite the obsession, much to my chagrin.
What’s really funny, is I don’t have millions, but the way that I monitor the stock market, you’d think I was (curse you CNBC!).
I’m Okay
Why It’s Harder to Invest than Reduce Debt
For me, it’s simply the variability of my investment portfolio that makes it so stressful for me!
With debt reduction, it was always so clean! You have an amount that you owe, and you make periodic payment to reduce that debt. Pretty simple and straight forward huh…
With investing, it’s an entirely different animal that is very unpredictable. Oh sure, you can invest on a schedule much like debt reduction, but that’s where the similarities end. With debt reduction, there is no “real” emotion to the characteristics of the payment. You pay the money, your debt decreases, no magic!
With investing you invest the money, and then who know what happens after that! You can invest for years, then in a snap of your fingers, blammo you money is mysteriously gone! Think Enron and Worldcom, blammo your investment is worth nothing except a tax write-off.
Another problem is that you can invest in a stock and it can flatline… if a stock goes flat, you are just as good having your money in the bank, no?
Next there is the opposite of the above, boom, the stock appreciates hugely and you get rich. This is the path that we all hope happens, but this is kind of like buying a lottery ticket to some degree. It’s possible, but it take patience and determination. Most stocks that appreciate hugely still takes years to get to that level.
So basically investing is like gambling and very emotional.
While investing is great and I love it, it’s very stressful for me.
I hope investing is less stressful for you.
Don
It seems like you are caught in the world of too many investment choices. May I recommend the Three Fund Portfolio? The 3 funds (Total U.S. stock market, Total international stock market, and Total bond market), especially if bought through Vanguard due to their low cost, will serve you well for the rest of your life. Adjust your asset allocation to age in bonds and the rest in stocks, with around 15% of the stocks in the international fund, and the rest in the U.S. total market.
And don’t watch CNBC or Fox Business. Those channels display what many call investment p0rn. It is not worth anyone’s time. Following the advice on those channels will end up costing you money.
Finally, Jack Bogle says that once you have ascertained your asset allocation, and set up an automated way of putting new money into your investments, “Don’t peak.” Do not spend time watching your investments go up and down. Only look at your investments once a year, when you rebalance your portfolio.
I suggest you join bogleheads.org, read the getting started section of their wiki, and then relax. You will learn from the bogleheads what true investing is, and that it is not gambling.
Investing is simple if you use the three fund portfolio. Then live your life in the pursuit of more important matters, like being with family and friends.
ahh yes John Bogle, father of the Index fund. Yep, great advice and within my 401k, I have most of the options you identify above (the 1 exception is I have the PIMCO Total Return Fund instead) I also have a few more picked too, but overall, I’m well diversified in domestic and international funds.
Sound advice though, very sound!
You can’t be worrying w/ every up and down of the market. Just let it run. Get a dividend fund, and ride the S&P 500.
You’ll be fine. I’m 42 and 100% in except for decent rainy day cash. Never pulled out in 2008 and won’t pull out the next downturn. It’s all about dollar cost averaging baby!
Do that and you’ll win.
Yeah, I let 2008 ride out too and even increased how much I contributed to my 401k :). Probably the best move I ever made with my 401k…
It’s only money though, and you are correct in your attitude towards investing. I’ve morphed it into a hobby but a demanding one unfortunately.
Glad to hear you are doing well!
I also miss the cleanness of debt reduction as you put it. There was a certain security and reliability in paying off debt that you just don’t see when investing. It took me a while, but I’ve come to enjoy the variability of investing.
Pingback: Carnival of Financial Camaraderie - June 8th, 2014 -
Pingback: Yakezie Carnival Financial Save | The Ultimate Juggle