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BehaviorWhen you are young, get into a good school gives you the opportunity for a good first job and wage. When you first start working, control your spending. Don't buy fancy high-end goods. The high-end goods charge high profit margin that is most inefficient spending for you and most profitable for the seller. Have self-control! (That reminds me when I bought my first new car on my first job.) If you can buy the same goods at discount price, why not? Your dollar goes bigger.
Spend on what you need, not what you want. Stop having low self-esteem moment that you need expensive goods to prove yourself. You should be confident with yourself, you do not need external materilistic superficial approval from flashy goods. For example, wearing a million-dollars diamond chain on your neck, that $1-Mill is not making you income, only incurs opportunity cost. Super-rich people can afford doing that but not middle-class. Middle-class should put money to good use and thrive to move upwards. Warren Buffet (once the world's richest man) did not have new furniture in the house but he bought "Star Furniture" business. Standing inline waiting for Starbuck coffee you waste time and money that you can make a cup of super tasty healthy coffee at home with same amount of time and a fraction of cost. Same goes with restaurants.
Associate with good people, friends, mentors, coleagues. Good associates lift you up and encourage you, help you to go on great path. I was lucky to encounter a few good people and recognize the opportunities of my life. Stop wasting time. Yes, everybody needs off-time, me-time, for relaxation but the outcome can be totally different. Do you really need beer-buddies for a rowdy night to drain energy and damage your health or can you use the time for exercise to boost your melatonin that makes your smarter and healthier next day?
Once you have surplus from your saving, learn where to invest, how to invest, how to grow and harvest investments. Learn the world of finance, learn public stock market. Get a mentor to explain to you. It will be good for your lifetime. Understand the power of investing. Education is investment. Use money to make money is easier than wage of labor. Equity ownership is investment and wealth. Own shares of public companies is equity owning, you earn income or growth from your investments.
When financial advisor told you they can "minimize risk, maximize return" - it is a lie, a sale pitch. High risk is associated with high return, low risk is associated with low return, by nature. (In other words, at high-risk, you could win big or lose it all. This is the first rule many people do not understand.) They form a balance-board. In this continuum spectrum of investment instruments you can choose the position where you feel comfortable, be it a mix of the Treasury-bill, bank deposit, bonds, stocks, high-tech stocks, mutual funds, index funds, ETFs, even venture capital. You are free to choose a position of allocation, and deserve your return!
Stock market equity is a net positive sum game with calculated risk. Casino is a net negative sum game with random risk. Stock market's up-down is event driven. Before the event there is possibility of information leak so you could see a little sign. After event, most retail investors just realized the event hindsight and take reaction, hence you could see a lag.
When others are greedy, you use caution. When others are fearful, you remain calm. When market is hot, a lot of speculations rush in, institutional or retail investors, including margin, long, short, swap, option etc. When market crashes (due to a piece component failing-falling like an avalanche), speculators stampede to the exit to minimize loss. The embeded risk speculators discharged, such as in swap, is to be loaded by others, be banks or private credit or government eventually economy. (We all remember "too big to fail" in 2009 subprime crisis), aside from investors loss.
Strategy
The purpose of diversification is to make sure when you need money you don't incur too much loss "sell low" or "wiped-out" at down turn. Diversification of risk/reward mitagates up-n-down impacts. Diversification means you choose a targeted allocation by your realistic goal on a balanced risk-reward investment structure. Diversification is an equalizer.
If your foreseeable expenses are covered by liquid asset, fixed income, savings, stable commodities etc., your untouched long-term investment should be in technology. We saw tech booms, like PCs in the 80's, Internet in the 90's, eCommerce, mobile in the 2000+'s, social media, cloud, streaming during and after lost decade tech bubble burst and subprime mortgage crash, then the fruits of eComm and now AI budding. In the long run, if you can hold out investment equity, it will gain for you. It is just the timing we do not know. If you enjoy the thrill, you can have a small portion X percent on the ultra risky instruments - you could be lucky to hit 10+ baggers or lose the high risk investment all.
Just a disclaimer here, Warren Buffet did not invest in technology. He worked-hard with his super value-buying ability and happened to be the richest person because of the lost decade. Peter Lynch had non-technology investment but he worked hard and had the super-ability to pick good companies.
It is too hard to pick a particular company, even pro cannot predict future. It is wise to hold a few non-leveraged ETF baskets (depends on your realistic goals, strategy and appetite - too greedy can drown you, too unambitious can starve you). You can use my 80-20 allocation strategy at below the bottom of this page.
When the market eventually even out to equilibrium (be after boom or crash) ETF is a balanced collective equity that is not too crazy, diversified with multiple company stocks usually in one sector not total market, low expense, fee and tax. If you got living expense covered thru up-n-down you can hold on bust periods and enjoy boom periods. When market crash happens, the trickle-down effect into economy is enormous.
Another way to look at your investment is to ask yourself realistically how much do you wish the yield as APR %?
We know the risk is inversely directly proportional to yield, high yield high risk. At highest risk means that investment can totally vanish or on opposite side gain many X times.
The Costco opens in Houston since year 2000 that I have been a customer executive membership. We have been Amazon Prime member since year 2003. I never direcly own their stocks. Why? I own ETFs and let indexer to deal with diversification and mix. I did not get the worst in lost decade 2001-2011; I did not get the best booming decade 2011-2025. Why? My approach is more moderate and it fits my goal and purpose. That is why it is called personalized investing. My risk level is calculated and acceptable to me, that I can sleep well at night. If you are happy with FDIC deposit and yield, that will be your deal.
Every once a while, annually or bi-annually, you make adjustments of your investments. Follow the daily-dollar-averaging and buy-low sell-high principles, never rush to buy or sell. Using tennis analogy, sometimes you make risky shots or error, most times you make shots within your expectation.
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