- Bill O’Reilly is not an investment expert, so how has he become such a successful investor?
- He recently discussed exactly that with Alexander Green. As it turns out, there are two important steps that pave the path to true wealth.
Six months ago, bestselling author and former Fox News host Bill O’Reilly and I got together in New York to discuss how ordinary Americans can become wealthy.
The video recording of that event – called The Great American Wealth Project – became a sensation. It has been viewed on Facebook alone nearly 12 million times.
Next week, Bill and I will get together at The Oxford Club’s headquarters in Baltimore to film a follow-up.
In a phone call last week, we discussed the main ideas we want to get across.
“My goal with this is to show everyday people what works,” said Bill. “And I want them to know there will be losses along the way. Because nothing in the stock market is guaranteed.”
“Most of all,” he said, “I want to explain that the secret to making money in stocks is to be smart and disciplined.”
His words struck me immediately.
Bill has done well with his investment portfolio but regularly concedes that he is not an “investment expert.”
Yet he’d just distilled stock market success to two words: being smart… and disciplined.
Some might hear those words and think, “Oh, great. I’m no financial genius. So where does that leave me?”
It leaves you in a good place, quite frankly.
As Warren Buffett famously said, “You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ.”
Yet, in my experience, many otherwise sensible folks are doing some dumb things with their money.
Here are just a few examples of non-smart behavior:
- Hanging on exclusively to cash and low-yielding bonds because you “can’t take the risk” of share ownership.
- Hoarding gold and silver.
- Acting on “hot tips.”
- Using leverage (i.e., borrowing money to buy securities).
- Trying to time the market by jumping in for the rallies and out for the corrections. (Looks easy in the rearview mirror. Damn near impossible when you look ahead.)
- Being so confident in your approach that you don’t diversify.
- Day trading, which is gambling, plain and simple.
- Ignoring the effect of trading costs, commissions and capital gains taxes.
- Buying (or rather being sold) variable annuities and whole life insurance, among the lowest-returning and most fee-laden “investments” on the planet.
- Turning everything over to that “nice young man” down at Merrill Lynch (who promptly converts a significant percentage of your assets into the firm’s assets).
OK, if that’s the dumb stuff, you may ask, what’s the smart way to invest?
From a broad standpoint, you need to asset allocate properly, diversify broadly, and keep a sharp eye on investment costs and taxes.
From a narrower standpoint, you want to make sure that every stock you own meets a strict set of criteria. You also need to know exactly where and when to sell.
That brings me to Bill’s second key to investment success: discipline.
If you don’t restrict your investments to high-quality securities… or use a proven sell discipline (like trailing stops)… or if you panic and run to the sidelines every time the headlines get scary – trust me – you will not succeed.
In short, Bill is exactly right. You need to do smart things with your money. And you need to act in a disciplined way.
You can put together the best portfolio in the world, but to maximize your gains – and meet your most important financial goals – you have to stick with the plan.
What I’m discussing here is just an outline, of course. What most people want and need is specific, actionable advice.
That’s what I provide in The Oxford Communiqué each month and in my weekly Portfolio Update.
Next week, however, Bill and I will discuss some of the finer points and show readers how to take their net worth to the next level.