...when the debt problem is fixed.
...when the markets pull back a little.
...when the EU crisis is over.
...when the elections are over.
Chances are you've said some of these same things to yourself.
Yet, waiting is exactly the wrong thing to do. Time is something you never get back.
And when it comes to consistent investment returns, time is the one thing you always have to capitalize on - without fail.
Besides, waiting makes it harder to get back in the game. Ask anybody who missed the S&P 500's 99.53% run up off March 2009 lows that carried things until April 2011.
Or the 87.26% run up through July 2007 following the low set in 2003. Or the 569.25% move from November 1987 (shortly after Black Monday) through January 2000.
No. The way I see it, the thing to do is to begin investing the moment you decide you want to. That way you pique your imagination, your motivation and your returns.
Five Ways to Get Better Results in 2012Here are five tips to help you get started:
- Have specific goals. Wall Street traders like to beat the S&P 500 or the Dow Jones Industrial Average and they pay themselves huge bonuses for having beat this index or that benchmark. But that's crap. Everybody I know invests to meet objectives like paying for college for their children or living the retirement of their dreams. Decide what you want and when. Then, figure out how you're going to get there. You might be surprised how manageable all of this actually is.
- Know why you want what you want. Many investors spend more time analyzing a new washing machine than they do picking their next investment. Or, they count on Uncle Bertie and his sure things. Both are bad ideas. Ask yourself if that new hot stock or exchange-traded fund (ETF) fits the goals you've laid out for yourself. If so, great. Buy it. If not, pass. It's a waste of money to have something in your portfolio that doesn't help you meet your goals, not to mention it's more risky, too.
- Be realistic. You'd be surprised how many of the investors I meet want to earn 5,000% by tomorrow at 8:00am and only use $100 to do it. Then again, maybe you wouldn't. It is possible, just not probable. There's a big difference. On the other hand, it's much easier to earn a consistent double-digit return from a choice like Kinder Morgan Energy Partners LP (NYSE: KMP) that yields a healthy 5.40%, or the quintessential "glocal" stock, McDonalds Corp. (NYSE: MCD), which yields 2.8%, was the best performing Dow component in 2011 and ended the year up 35.50%. Since 2000, KMP has returned 768.58% while MCD has tacked on 220.32% -- even with both the dot.bomb crash and the financial crisis. You probably don't need to be reminded, but I will do so anyway to make my point: The S&P 500 has turned in 10.87% over the same period -- including dividends.
- Take action. The single biggest impediment to success stares back at you every morning in the mirror. Psychologists say we have built in saboteurs; common wisdom says we are our own worst enemies. Both are true. The "enemy" is standing in the mirror and is so persuasive we can talk ourselves out of anything, including success. That's why actually taking action can quiet the doubt and help minimize any backsliding. Besides, if you hit a few small winners, you'll have the confidence needed to take even stronger, more decisive actions down the road.
- Don't stay down. My grandfather used to tell me that it was not how I handled getting knocked down that mattered but how I got up. That's why sticking to a disciplined plan is a lot better than making panicky decisions. If you're simply reacting by the seat of your pants, chances are you're going to get knocked down a lot. But if you get up, plan ahead and take steps to avoid the next stumbling block, chances are you'll begin to pull ahead. And stay there.
That's a fair question and an important one, especially now when there are so many fundamental problems to consider - Europe, China, our debt, the lack of adult supervision amongst the world's central bankers, and more.
That's what trailing stops are for.
If the fire gets too hot, trailing stops will get you out of the kitchen. The important part is to get back to cooking when things cool down.
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