At Liberty Through Wealth, we aim to provide valuable financial insight from top-notch investment experts. That means we often dig deep into the topics the mainstream media ignores… or gets wrong.
So on August 20, we decided to address some of the things the media isn’t telling you. In our Town Hall with Chief Investment Strategist Alexander Green, Alex answered questions directly from readers about a variety of investing topics.
One of the biggest takeaways?
Things aren’t quite as bad as the headlines would have you believe.
Read on for some of the highlights…
Question: How can investors maintain an optimistic outlook?
Alex’s Answer: You have to remember that the national media delivers the world through a dark prism. Despite the pandemic and economic contraction, Americans are living longer than ever. Our standard of living has never been greater. Our educational attainment has never been higher… People are living longer, healthier, safer, richer, freer lives than ever before.
Question: What is the best way for new investors to get started?
Alex’s Answer: First of all, open a discount brokerage account. Unlike in years past, there are no minimums. There are no commissions. There’s never been a better time to be a beginning investor. You can do something simple like buy an S&P 500 index fund, or you can buy shares of individual companies.
Question: What is a good investment strategy for a beginner?
Alex’s Answer: Own a diversified portfolio of index funds: large cap stocks, small cap stocks, foreign stocks, high-grade bonds, high-yield bonds, etc. You can get a great deal of diversification and a perfect asset allocation by following a basic asset allocation strategy.
(Editor’s Note: Alex also recommends checking out his book The Gone Fishin’ Portfolio: Get Wise, Get Wealthy… and Get On With Your Life and subscribing to The Oxford Communiqué for even more financial insight.)
Question: How can investors get over their stock market fears?
Alex’s Answer: It’s rational to be fearful about stocks. While the long-term trend in the stock market is up, it does have some bone-rattling drops from time to time – we certainly saw that in the first quarter of this year… Here’s what you have to keep in mind: People everywhere have economic needs. And the government doesn’t build their houses and make their clothes and grow their food – that’s corporations and marketers and transportation companies and utilities and healthcare companies. So you want to own a piece of those companies.
Question: How can investors protect what they have?
Alex’s Answer: There is nothing, over time, that has outperformed a diversified portfolio of common stocks or, better yet, uncommonly good stocks. That’s what you should be doing: owning lots of businesses. Diversify so if you have trouble in one area, it doesn’t affect your whole portfolio.
Question: How should investors balance and diversify their portfolios?
Alex’s Answer: There is no one-size-fits-all risk tolerance. Young people have long time horizons and should be willing to withstand more volatility. Older people obviously have shorter time horizons and don’t want to see as much volatility.
Question: How can investors balance different strategists’ advice?
Alex’s Answer: There’s an old saying, “You can’t kiss all the pretty girls.” And that’s true when it comes to investing too. There are a lot of great ideas out there. Warren Buffett, the most successful investor of our era, said you ought to act as if you have a punch card with 20 punches on it, and not buy anything unless you’re willing to use one of those 20 punches to buy it. That’s what keeps you from overdiversifying… You’ve got to limit it to the best of the best.
We hope you enjoyed Alex’s special Town Hall video and found his insights helpful. If you have any questions you would like to see him answer in future videos, please let us know in the comments.