Happy New Year to you! As we kick off 2014, I want to start by looking back at last year. That’s the best way to move forward, right? There was an article in the Wall Street Journal last week that declared “Boring Investors” as the big winners of 2013.
What is a boring investor?
I wouldn’t personally call it boring, but they defined it as people who simply bought and held a “plain vanilla” portfolio of stocks. Those were the winners of 2013—NOT the investors who employed risky, complex strategies or who tried to time the market or chase high returns in emerging markets or hedge funds. Simply owning an S&P 500 Index fund returned a whopping 32% with dividends last year. That’s incredible! By contrast, emerging markets, commodities and hedge funds all lagged those results significantly.
So what’s the takeaway as we move into 2014?
The lesson is that you don’t have to be a hotshot to make money in the stock market. In fact, overconfidence can be a complete liability. The flip side is that so many people don’t invest because they feel they don’t know enough and are intimidated. You don’t have to have the fanciest, most expensive, international managers and you don’t have to know the ins and outs of every move the market makes. You just need to get in the game. Because here’s the thing: Those so called “boring” investors were still INVESTORS. According to Morningstar, the average mutual fund focusing on large-company stocks was up 32% in 2013, and the average fund focusing on small company stocks was up 38% for the year. That’s a stunning one-year return for U.S. equities. Will every year be like that? No. But if you kept your money in a savings account last year instead of the stock market, you’d have ended up down after inflation. The interest rate on a savings account was a pathetic 0.1% last year. ZERO POINT ONE percent! That’s basically zero, and no one thinks we’re going to see that change any time soon.
So 2014’s savings shouldn’t be in a savings account?
Exactly. By all means, everyone should have an emergency fund in their savings account, but if you’re not investing in the stock market, you simply cannot afford another year of sitting on the sidelines. This is the year to get started. The best way to dip your toe in is with dollar-cost averaging.
Remind us what dollar-cost averaging is again?
Sure! Dollar-cost averaging is when you invest a set amount on a regular schedule regardless of the share price. That means you’re consistently buying into the market and not trying to time the highs and lows of stock prices. It’s a disciplined and patient approach. The best part is that so many mutual funds have minimum investments of just $50 a month—and mutual funds offer instant diversification with a basket of stocks.
Forget the diet and the gym and resolve to get your finances in shape! That $10,000 you had in savings for the year is worth $10,100. Woo hoo! You made $100! I’m not knocking the $10,000 you kept in savings. That’s great! But if you’d invested the money in the S&P instead of keeping it at the bank, it would be $13,200. That’s $3,100 more—a down payment on a car or a swank vacation or just a significant addition to your long-term retirement goals.
Mellody is President of Ariel Investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS News.
Also On Black America Web:
This Week’s Celebrity Instagrams (10/15-10/21)
31 photos Launch gallery
1. Just a NY girl with BIG dreams....
1 of 31
2. HAPPY CHILDREN=QUALITY PARENTING. We don't always see eye to eye on everything and that's normal. We're human beings. But we come together and do it right for what's important, the kids. We are not enemies, we are parents. And we are parents 1st. S/O to @monyettashaw for making Mason's bday memorable. S/O to @itscrystalsmith at home taking care of our other lil' Prince. ❤️❤️❤️ THIS IS WHAT CO-PARENTING LOOKS LIKE. #Blessed #Happy #AboveTheDrama #BiggerThanUs
2 of 31
3. So happy to finally be able to share with you all that I’m the new Global Brand Ambassador for @Revlon! Follow my day on RevlonSnaps. Yay! Choose Love, Everybody! #RevlonXCiara #chooselove #ad
3 of 31
4. Glam on point!!!@makeupbymotoko & @shaylinjoneshair #easybreezy @lifetimetv #beachesmovie #january2017 😘
4 of 31
5. ✨True love ✨📸: @jessiemarrerophotography
5 of 31
6 of 31
7. Today was not easy..but by the grace of God we all got through it. Words cannot express our gratitude for all of your Prayers, Positive thoughts and Support for us throughout the years. Tommy will be missed but most certainly never forgotten...And PLEASE don't ask "Where's Martin?.." he was there too...just not in this picture. Lol! God bless you all.. #LoveConquersAll #MartinShow
7 of 31
8 of 31
9. West coast get ready for #RockyHorror. I will be live tweeting again. #letsdothetimewarpagain
9 of 31
10. #THEKEYS pre order yours now ... Available everywhere #NOV22 #WeTheBest 🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑
10 of 31
11. We about to ROCK at #KCABlackBall!! All for our life-changing effort to end 🌎 AIDS.
11 of 31
12. Today's #SNAPJACK is brought to you by @yazzthegreatest 😂😂😂💋💋💋
12 of 31
13. Damn girl you kinda old to be headed to the Go Go. You coming in at the age they leaving. LMAO
13 of 31
14. Daddy daycare B-Boxin with @acewellstucker @shopraisingace
14 of 31
15. #FBF Naviyd & URV "LIL MONSTERS"
15 of 31
16. HAPPY BIRTHDAY TO ONE OF THE BIGGEST LEGENDS IN OUR HIPHOP HISTORY! @snoopdogg CONTINUED BLESSING AND LOVE FAMILY!!!!! REAL OG!
16 of 31
17. Thank you for a beautiful night VSU! Let's do it again! #HOMECOMING
17 of 31
18. Had a great time this morning with my familia Erica, Griff & Truth!!
18 of 31
19. Check out my interview on @essence facebook live. #inmyownwords #nycpromo #day2
19 of 31
20. #She💋 #tbt #TheCoveAtTheAtlantis #DawgPawsAndAll
20 of 31
21. Bae #retailtherapy
21 of 31
22. Why me and @coryhardrict got the same pose... and notee... new mouth #naked
22 of 31
23. When my husband is my personal 'hype-man'! it kills me every time! 💜😂 #WHATNOW #lostfiles📷
23 of 31
24. Diggy Simmons
24 of 31
25. Hand full of @jacquieaiche 💙💎💍 @esnail_la 💅🏾
25 of 31
26. SuperSoulers! You can watch my interview with Carl Lentz live from my Facebook page, tomorrow at 11a ET| 8a PT. #SuperSoulSunday
26 of 31
27. 💋 .. When the friendship is easy like Sunday morning. ☀️
27 of 31
28. Sunday mornings are the best........... hugs and cuddles with my angel
28 of 31
29. #huggar16 #hellohuggars
29 of 31
30. My gym is everywhere!.. #RnBMoney #TheGeneral 📸: @twelvepastseven
30 of 31
31. Nothing I would rather be doing... Rocko setting up our movie, Romelō working on a puzzle & Laiyah singing and sharing all she's learning at school... I'm so grateful for the joy they've brought into my life ... Praying for peace , joy & love in the home of EVERY family ♥️ #HeadScarfPJSunday LOL 😂
31 of 31