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.
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This Week’s Celebrity Instagrams (11/26-12/2)
30 photos Launch gallery
1. Little Legend and Puddy 😍😍😍😍
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2. "You on point Phife?" "all the time,Tip". 💥 #bannedfromnormal
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3. Vegan! The Impossible burger at Crossroads
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4. Lawrence #BeforeandAfterEpisodes 1-4: 184lbs 13% body fatEpisode 8: 196lbs 8% body fat S/O @coachdaveboxing with the works outs and @kildareriordan with the nutrition
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5. Jus haaaanngin out
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6. Meanwhile back at home in Atlanta GA someone mad they not on the 🛳. 😳
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7. No limits... Photo cred: Chris Bridges @ludacris
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8. new new
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9. Apparently my 260lbs is too much for the actual vines in the Hawaiian jungles to hold me without breaking and me falling hundreds of feet. So for safety purposes, I'm forced to swing thru #Jumanjj on wires strong enough to hold 12 adult buffaloes and 1 adult Rock. #OnSet #Jumanji #IronicallyIEatBuffaloDailyForLunch #MoreManThanNatureKnowsWhatToDoWith
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10. hey ma! 🎎#wcw 💙
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11. Surprise visit to our factories!!! #GoodAmerican #USA
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13. Peachy Keen 🔥✨⚡️
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14. If this don't look thankful I don't know what does. Happy Thanksgiving to you and yours. #UltraBlessed #24kMagic #SweetPotatoFly
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15. Late nights @nbcmarlon with the writers... we in here!!!
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16. There goes my baaaaaaaaabbbbyyyyy #QueenKingMagic!!! We're up to something! Ira BIG!!! Stay out our buisness -
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17. You want to win every game you play but when you come home to these faces... who cares. #ILoveYouGirls best part of my day, everyday!
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18. Steady,steady..... full size jenga.. "I got this one "???? Or do I ?
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19. Cornrows kind of day 😉@dontaysavoy2 you convinced me and I love. ❤️️
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20. #BrotherlyLove #tbt
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22. #basel #TeamLOVE @kingcombs
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23. Just introduced a special screening of @directher 's groundbreaking (must see) documentary @13thfilm with my brother @themichaelealy | @unitedblackout #blackoutblackfriday
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24. Me & Vanessa Williams giving #DuckLips #Pose on the set of #DaytimeDivas @vh1 - Coming Soon to a tv near you. Lol. - My make up done by @makeupsurgeon
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25. This picture just makes me wanna praise the Lord, you hear me!!!!!! Yes Lord brotha #TEDDYCAMPBELL What a #man !!! You are everything right on this picture husband ......... #gorgeous #stylish #classy #strong #masculine #king #sexy #debonair #gentlemenstyle And that #bible in your hand just seals the deal for me (probably cause i know that, that is what helped you become just as amazing as you look😘). While my heart and mind experiences the goodness of God at #church on Sundays, my eyes experiences the goodness of Teddy😍. Amen somebody🙌🏽. "Bless the Lord oh my soul and all that is within me bless his holy name" #myman #myhusband #goodman #blackman #dapperman #godlyman #goodfather #mybestfriend
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26. Yesterday was my mama's 53rd birthday!!!!! Got to celebrate with her all day. If this is what I have to look forward to I can't wait. Looking like a soft bucket a cocoa butter. Yaaaaaaaaaas! 😍😍😍 love you mommy!
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27. "Shout out to @PureAtlanta for getting the family right"....I'm loving this jogger. 😍😍
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28. This pic warms my heart ❤️ #myLogiebeans and aunt aunt umba @itowandabraxton 😘
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29. You will always be my baby😜. #HappyBirthdayReginae #mybaby18
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30. GC "Gods Child" Red on Red SweatSuit available now at www.MonicaApparel.com ... Take Your Crown wherever you go!! I'm pictured in a Medium... Go to the site now for other options ... cc: @trukernell
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