Summary of Financial Decisions
Asset Allocation by Roger Gibson
Gibson explains that the most effective way of making important decisions, mostly about their long-term investments should be based on the concepts of time and the purpose of the money. He urges that people should try to diversify their incomes as much as they can. The patience he says pays, and this is the only way a person can earn from a long-term investment. In a tone to encourage the investors who are looking forward to venturing into long-term investments, he explains that with patience, many firms have moved from 10% to 90% due to patience and trust in the economic system of the nation. He further points out that investing in asset mix strategy has proven to be useful since it allows them the chance to snipe hunt. Through this process, they get to avoid risking their assets all at once. Persuasively, Gibson explains that investing in asset mix is the surest way to acquiring happiness and, at the same time, success. Arguably, Gibson enlightens all investors, both the aspiring as well as those that are already investors. After reading this argument, I have come to realize that I can do this so that I can eliminate the risk of losing everything at once.
Asset Allocation by John Templeton
Templeton, on the other hand, believes that investing is all about common sense. Arguably, a person will only invest in something that he or she predicts that will yield benefits. He gives an example of buying a company’s shares at low prices, which he explains that is less risky as opposed to buying at high prices that might impact on the overall income of the individual in the event of making a loss. He also encourages the idea of diversifying investments so that a person can minimize the amounts of risks that the person makes. When making any investments, a person has to look into the possibilities of changing economic conditions and consider how they might impact on the value of the assets. He also introduces the dollar-cost averaging, which, according to him, is the idea of investing the same amount of money at different intervals in a business whose prices fluctuate frequently. Through his arguments about asset allocation, I believe that it is a matter of common sense. When investing next time, I will take significant consideration in the discussions that he makes. Don't use plagiarised sources.Get your custom essay just from $11/page
Nine advantages of long-term investments
- Long-term investments tend to give a person peace of mind by taking emotions out of the equation. Unlike the short-term investments that keep a person logged into a computer checking if they are making profits or losses.
- The data received from these kinds of investments are usually not far from the correct ones. It gives people the chance to enjoy the game of investing with the market forces acting against them.
- These kinds of investments also allow an individual to compound works to their advantage. With this chance, a person can get the opportunity to make more profits.
- Long-term investments are also so easy to handle, and as such, they can be controlled by anyone. It does not offer different trading styles, and therefore, there is no need to get involved in any training.
- Additionally, these kinds of investments tend to give a person a better sleep at night since they do not stress a person so much. Also, there are no concerns that will keep on popping on the laptop for a person to look into continuously.
- The long-term investments also give a person the chance to work towards correcting the investments that he or she might have made in the course of their investment. Through thorough evaluation and with consideration of the market and the market forces, a person can make favorable changes to the investment plan that was initially generated.
- Through this form of investment, also, a person is likely to save by paying less on the taxes. Research has it that long-term investing tends to save up to a total of 15% to 20% of fees annually.
- In Long-term investments, commissions are an afterthought. Ideally, a long-term investor can find himself or herself once in a while paying commissions since it is not something they come across often.
- Taking this kind of investment also creates an aspect of security since it protects from the loss of investment opportunities.
Holding Stocks for 20 years can turn bad Returns to Good
The author points out that research to support the idea of investing for 20 years have shown that the investors do not make any losses that they can associate with the period concerning the market forces and the changing economic conditions. He argues the long-term investments that go beyond ten years tend to yield positive results in terms of their performance. Ideally, the principle that is applicable in this case is that the returns of an investment are smoothened over time, and this makes it even better in terms of its performance. The author further gives an example of the OPEC, which caused huge benefits after investing for 60 years. He provides an account of the various financial challenges that the market has been exposed to and while referencing the solidity of the long-term investments, indicating just how resistant the long-term investments can be when exposed to all these conditions. Following this reading, I am positive that I want to venture into a long-term investment for 20 years so that I might avoid additional costs as well as gain more from the process.
Benefits of Diversification
Agreeably, diversification is the essential aspect or determinant of long-term investments. The author encourages that people should understand the benefits that come with diversification before they can decide on the best way to approach the aspect of long-term investments. The most evident benefit is the distribution of risk, and this means that if one loses at some sector of the economy, he or she can gain on the other investments and thus the loss and the balance of the profits out. Also, spreading money across different investment platforms tends to yield various forms of revenue, depending on the types of investments. In other words, this kind of investment tends to promote the distribution of money and thus capturing different sectors where an individual not only gains experience but also distributes the possible risk. The author gives a strategy that investors can use to venture into the market. In this case, he explains that taking the hands-off approach is likely to encourage investment into different sectors and, at the same time maximizing on the profits that are being made but maintaining the losses at their lowest. Ideally, this kind of investment tends to create a new era of opportunity through which an individual can invest and yield tremendous benefits. From this, I have come to learn that the most crucial aspect of investing is engaging in diversification since it does not only contribute to collecting profits from different sections but also aids in the distribution of risks.
Stock Market Strategies
Twain looks into the types of investors that are involved in the investment arena. He asks and explains the meaning and differences between an active and a passive investor. Twain reveals a common belief that many economists hold about that market that the markets can quickly adapt to changing times and information. He further explains the manner through which people can make money from investing in stocks. One of the methods that he gives is through dividends. Other than that, the investors can gain capital gains from the sales of a major asset of the firm. Twain identifies that the most effective financial tool for achieving diversification is a mutual fund. It gives the most effective outline of the most cost-effective option of investing.