Investment Strategies 101

Harold was 82 when we met. He told me he quit smoking when he was 45. He then invested the cost of a carton of cigarettes every week for twenty years. As a result, when he retired he had investments worth over $60,000 and he had bought two cars.
Harold had discovered an important investment strategy -consistency. He didn’t invest large sums, he invested small amounts regularly, he didn’t care about stock markets going up or down, who led the government, or what newspapers pronounced.
Harold had also stumbled on another valuable strategy, dollar cost averaging. When markets where down his consistent investment dollar bought more, when they were up his dollars bought less. This strategy lowered the average cost of his investments.
At 82 you might expect Harold to invest conservatively, he had avoided that trap too. Investing should be based on lifestyle goals and spending habits. Harold had about two year’s cash flow in conservative investments; access to this money when needed was more important than interest rate.
Money Harold didn’t expect to need for three or more years was invested a little more aggressively to earn a better return and, because he was an optimist (which may explain why he waited to age 82 to seek estate planning advice) Harold also had his long term investments. This was the engine of his financial future, some volatility accepted for a higher rate of return.
Congratulations Harold you have earned an “A”+ in investing 101.