Before You Invest

The rationale behind the basic investment strategy I have suggested is simple. The simple strategy of holding total stock market and total international stock market over 20 years or more is virtually certain of outperforming the vast majority of the investors almost by definition. It is highly tax efficient, does not require any intermediary, almost maintenance free and extremely inexpensive to implement. But by far the biggest advantage is that the investor does not need to know or worry much about investments beyond a few basics. This translates into an investor less likely to panic in bear markets thus protecting against the most common of investment mistakes - investors own self destructive behavior.

However, this may not be a suitable investment approach for all the people. You first need to make sure that this investment philosophy suits your temperment and beliefs. For example, if you strongly believe that markets are inefficient then you may not hold on to this portfolio during severe bear markets. Another assumption is that you would be investing small amounts relative to your networth (or expected networth in the long term) over a long period of time.

My personal investment approach deviates significantly from the approach in the basic financial planning article because it does not suit my personality, my investment philosophy or my investment beliefs. Make sure that whatever investment approach you are taking similarly reflects your own personality, philosophy and beliefs.