If I Were In My 30s, I'd Make This 1 Investing Move and Never Look Back
Key Points
If I could do things over again, I'd save for retirement very differently.
I would choose a safer and less stressful approach to building my nest egg.
Ironically, it would have likely yielded results just as good as the ones I achieved.
It's so cliché to say, "If I had known then what I know now." And yet, like most clichés, this one is rooted in truth. It certainly is for me anyway, including how I handled my investments. Now older and wiser, I realize I unnecessarily did things in a less productive way.
I can't go back and change it now, and that's OK. I did all right. I can pass some of my wisdom along to the 30-something crowd, however, which is the age at which I was finally ready, willing, and able to start tucking away some serious money for retirement. In fact, one simple (two-part) move could make a world of difference for you.
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My super-simple tip
If I could do it all over again, I'd automate everything that had to do with saving for retirement. And I mean everything, including direct deposits to my retirement accounts, and then the purchase of something simple I'd be comfortable buying and holding regardless of the market environment or economic backdrop.
That's a fund like the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) or the Vanguard S&P 500 ETF (NYSEMKT: VOO), of course, both of which mirror the performance of the S&P 500 (SNPINDEX: ^GSPC). For most workplace retirement accounts, this plan would probably utilize a fund like Vanguard's S&P 500 Index Fund Admiral Shares (NASDAQMUTFUND: VFIAX) or the Fidelity 500 Index Fund (NASDAQMUTFUND: FXAIX).
That's it. That's the plan.
Image source: Getty Images.
Sure, it's boring. It doesn't leave room for picking individual stocks. It doesn't leave room for choosing a more aggressive fund either. Never even mind the fact that committing to a recurring deposit could create some money-based strain if I need some extra cash in any given month.
I'm OK with all of that, though.
Build in your discipline now to sidestep stumbling blocks later
Why am I OK with all of it? Because I know I'd be better off now if I had done it this way then.
As for the idea of a portfolio consisting of nothing but a basic index fund, the truth is, I'm not sure it was worth all the time, stress, and risk of attempting to outperform the overall market. While I'm pretty sure I beat the S&P 500 during this stretch, I certainly didn't beat it by enough to justify the amount of peace and time I sacrificed to do so. And those are two things you increasingly appreciate as you get older.
For me, though -- and I believe most other investors -- the big stumbling block is not consistently contributing money to the effort, and instead only committing cash toward your retirement when you've got plenty of it to do so. Using this approach, you run the risk of not saving enough when you really need to. Sure, regularly scheduled deposits can admittedly be inconvenient at times, sometimes forcing you to rearrange or even outright cut your spending. It's better to stretch your budget early on in your life, however, so you can let time do as much work as possible with as much invested capital as possible.
That's just my advice, but I'd be willing to bet a bunch of other people my age would tell someone in their 30s the exact same thing.
James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.