About the Lazy Person's Investment Strategies
Trading in the financial markets every day is not essential to success in investing. There are plenty of investment opportunities for those who would rather take a passive approach to investing. In fact, there are some benefits with passive investing that you cannot get if you actively trade.
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Benefits
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One of the benefits of using a lazy trading style is that you do not have to focus on the investment world to be effective. You can focus on your job and doing what you enjoy. Then your money can earn a return for you without a lot of oversight on your part. Another benefit of passive investing is that you will have fewer transaction costs to worry about. Those who trade in the markets frequently have to deal with commissions on each trade.
Types
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Several investment types are available for those who wish to take a passive approach to investing. For example, investing in a growth mutual fund could provide you with long-term gains without having to trade frequently. A money manager will take care of the investment decisions for you. Investing in bonds can be another passive form of investment, as they send you a regular interest payment, and most of them have long terms. If you have a large enough account, you could also hire a money manager to individually handle your account.
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Diversification
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Instead of trying to choose an individual stock that you expect to increase substantially, you could instead invest in many stocks in the market. This is the basic idea behind index fund investing. When you invest in an index fund, you invest in every stock in a particular index. This allows you to take advantage of the slow and steady growth of the index without actually doing any research on individual companies.
Time Frame
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As a passive investor, you will need a long-term investment approach. This type of investing is sometimes referred to as "buy and hold." Under this approach, when you buy a security such as an index fund or a mutual fund, you hold on to your shares for multiple years. If you try to time the market, there is a good chance that you will choose the wrong time to buy or sell. By buying and holding, you can overcome market volatility.
Target-Date Funds
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One of the most popular vehicles for lazy investors is the target-date fund. This type of mutual fund allows you to choose a target date for your retirement. The portfolio invests in different asset classes such as stocks and bonds. The fund's investments automatically become more conservative as you get closer to retirement. With this type of investment, you do not have to do anything except keep putting money into the fund as you go.
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