IFB63: Personal Finance 104: Designing Your Investment Lifestyle

 

Welcome to investing for beginners podcast. this is episode 63 tonight we’re going to continue our discussion on personal finance, this is personal finance 104 and tonight we’re going to talk about designing your investment lifestyle.
We’re going to talk a little about picking an investment strategy and different areas of that and I know Andrew had some things you wanted to start off with so when I turn it over to him.
Andrew: yes so last week we talked about budgeting the next natural step is figuring out what to do once you have that extra money. so like they have mentioned you’re going to want to have to pick an investment strategy you want to look around and really try to understand you not just pick a strategy just off the onset just because it sounds good.
But try to understand what’s going to fit so that might that might entail looking at a couple different things before you really make a decision and I’ll kind of explain why.
But there’s a lot of different ways you can invest money we covered this in our back to the basics part 3 or we talked about stocks versus other investments we’ve talked in the past about how we’re both adamant value investors and why we kind of why we tilt that way and why we recommend that investors try to model portfolio a base approach trying to buy low trying to buy businesses that are trading at a discount to their intrinsic value.
I don’t have what episode that is off the top of my head but we did talk about what kind of options you have as versus any other sort of investment I also talked about like value machine versus growth investing versus whatever other kind of strategies are out there so those are two episodes to help a broader base and a broader sense of kind of what all your options are out there.
I wanted to start off though with a couple of things that maybe if I talked about it will help give like a mindset shift on why it is important to pick a strategy in this way and to kind of understand and conceptualize what I’m about to say.
Basically when you break down investing there’s two forms of it you have passive investing and active investing. So passive investing is the type of vesting that’s usually recommended by investment professionals if you go see a financial advisor they’ll usually recommend that as well and basically what that means is you’re just buying stocks and then not touching them that’s the best way to do passive strategy.
And it usually entails buying like an index fund and just passively holding it and not touching it so if a passive strategy fits your personality if it’s something you’re able to stick to then it can be a very great option for you.
The other side of that is active and what active means is you’re trying to pick stocks you might be selling in and out you might not be a buying hold forever and although at least personally I really try to talk about buying stocks and holding them as long as you can ideally forever. I also understand that stocks go bankrupt and so that’s why I always talk about the bankruptcy research the negative earnings discussions I went to sell.
But in general you want to try that hold your positions as long as possible so that’s what active is you’re buying individual stocks you’re making stock selections that way then you’re also making decisions on the opposite side of how long you’re staying in these stocks when you’re getting now how long when you’re getting down when you’re staying in and all those sorts of things. And I do believe like for the majority of investors that having a passive strategy is the best way to go.
However I see a huge problem and I’ve kind of talked about this before but a huge problem with the idea that you’re just going to tell people...