Recent posts by Craig Stock
Craig Stock heads Vanguard's Corporate Marketing and Communications department, responsible for delivering investor information and education in Vanguard’s "plain talk" style.
Nearly 20 years ago, I helped a group of friends start an investment club.
We were regulars at a friendly poker game, so we named our venture the Busted Flush Investment Club. My hope was that I could interest these guys—they were all guys—in learning more about investing. The idea of investment clubs has been around for many decades, and some individual clubs have kept going for years.
The vast majority of what you read and hear about investing focuses on returns. As in, what mutual fund, or stock, or asset class investors ought to buy now to garner the best return for some indeterminate period. Or which stock or mutual fund had the best or worst returns for a given quarter or year or decade.
Risk—the flip side of reward—tends to get much less attention, except in the wake of severe market slides such as we’ve seen recently. And that’s not sensible, because risks are always present in investing (well, in life, too, of course), even if those risks are not apparent.
I’ll admit it’s a stretch for investors to find something positive from the past 18 months or so. But perhaps one plus is that a number of investing beliefs are under examination, and that many of us are reconsidering our beliefs about the risks that are always present in investing. (Of course, there also are risks involved in NOT investing, but that’s a topic for another day.)
Young journalists are advised: “If your mother says she loves you, check it out.” A bit of investigation and a dash of skepticism are in order for investors too, whether applied to long-held tenets of investing or when seeking to debunk conventional wisdom. The important thing is to put some thought into your investment approach.
The idea that you should have a cash reserve equal to three to six months of your living expenses would almost certainly make any “Ten Commandments” list for personal finance.
It might also be one of the least obeyed commandments, as suggested in a recent post by my colleague Ellen Rinaldi. I wholeheartedly agree with Ellen’s emphasis on having a cash reserve—savings stashed in a bank account or money market fund—before getting too focused on investing.
We spent part of last weekend looking for replacements for our old washer and dryer, which definitely were on their last legs. In doing a bit of research before heading for the appliance store, I found an unexpected parallel with investing.