A not all too famous person once said, “I used to be indecisive. Now I am not sure.” — me in the not too distant past.
Choice is hard. When faced with more than 2 additional options to choose from, we often get discombobulated (English is such a great language) or confused, and then we don’t decide and we stay with what we do/have already.
When there is only 1 additional option, we often choose that one, but when there are several options, we become frozen with indecision. Very often, doing nothing is the worst choice we can make.
How does one overcome that bias? Well, one way is to model the successful solutions of others. Investigate what others in a parallel situation have done and model their procedures (with your own personal twist, of course).
Another way is cutting down the number of choices to help you make decisions.
Let’s do that with one of those essential decisions in life. Where could you smartly put your money—to make it work harder 24/7 (without taking any holidays)—towards a more comfortable retirement for you?
- Decision: There is the choice between lazily burning money—daily without fail—in a Fixed Deposit or Savings Account, or growing it long-term above the inflation rate in the stock market.
Easy choice, right? As close to a Know-brainer as it could get …
Why do I say that?
Because you know that the vast majority of humankind is waking up every morning to make the world a better place and this goes hand in hand with growth in general. If we all grow, then automatically so does the economy. And when the economy grows, the participants (corporations) in that economy grow as well. And that growth is reflected over time in higher stock prices (higher valuations) for those corporations (not all, but the majority of them).
That inherent drive of humans for progress has created the biggest moneymaking machine in the history of the world: the stock market.
So the stock market it is.
Let’s get picky. People are often trying their best to pick the next hot stock. Many say that successful stock-picking is like finding a needle in the haystack. I say that the only thing more difficult than finding a needle in a haystack—is finding a needle in a needle stack. And that is what the stock market is for me.
- Decision: You have the choice between a needle (or a few of them) and investing in the entire needle stack. How? Just buy a very broad-based Exchange Traded Fund (ETF), like the S&P 500 (SPY) in the US or STI (SPDR STI) in Singapore and you are ready to go. Ideally, via an automated monthly Regular Savings Plan. That’s what I call smart investing.
So where are we after those two tough decisions? Already miles ahead—on the way—to building up a nice low-risk nest egg for your retirement in 10+ years. I mention 10+ years because history shows that the longer you invest in the stock market, the lower the risk becomes. The earlier you start investing, the more time you would have for two important factors to surface:
A) Compounding can begin to work its magic.
B) The odds of success can be firmly placed in your favor.
“Choosing is existence: to the extent that you don’t choose, you don’t exist.” — John Barth Author
“One of the painful things about our time is that those who feel certainty are stupid and those with any imagination and understanding are filled with doubt and indecision.” — Bertrand Russell