Don’t Lose Sight of the Long Term

Another big mistake to avoid would be losing sight of the long term. As human beings, it’s very difficult for us to think long term. When you think about your future self, it’s tough for most not to go straight for that instant gratification. Deep down inside, we all are intrigued by the get-rich-quick scheme, the short cut to a million. We fantasize about hitting the lotto or coming up with a new invention and striking it rich overnight. We daydream about what life could be if we suddenly inherited $50 million from a long-lost uncle. It’s been embedded in us as we have evolved over the millennia to think creatively and selfishly. In many ways, it’s a survival technique to want to find the quick fix. We want to find the hack or the shortcut, whether it be with losing weight, making money, or fixing a problem. There are no shortcuts with the Dividend Lifestyle; it takes many years and decades to do it the right way. It’s all about long-term buy and hold investing, staying the course when times get tough, dividend reinvesting and avoiding the herd mentality. No short cuts, anything good in life takes time, and the road to Heaven is narrow.

Another mistake that investors make is not maximizing the various account types that hold their investments and retirement funds. For example, trading inside of your long-term retirement accounts as if they were shorter-term brokerage accounts. Retirement plan participants often say: “Hey, I have a 401(k) or an IRA that I regularly save money in, and I want to trade this new biotech stock my buddy told me about, or buy Bitcoin with those IRA funds” Qualified retirement plans, are by design, typically long-term investment vehicles. For a younger investor in his thirties who has a 401(k) at work, you’re talking about three to four decades until you tap into that money. The money then has to sustain you through retirement. Long-term vehicles are generally a great idea for buy and hold dividend-paying stocks. You enjoy the dividend reinvestment, dollar cost averaging into the stock or fund, and the price appreciation of the underlying stocks over the decades. If you want to have a speculative trading account, by all means, take 5% of your investable assets and keep it parked in an online brokerage account where you can trade to your heart's content and be as risky as you like. The bulk of your wealth, however, needs to be invested appropriately and for the long term, sometimes the VERY long term. The centenarian is now the fastest-growing age group, demographically speaking, as people generally continue to live longer. There’s a good chance that a 30-year-old today will be 100 one day, so you’re talking about a 70-year time horizon in some cases. That’s a long runway and the ideal environment to invest in high quality businesses that are going to be around in 100 years, as opposed to speculating on short-term garbage that you read an article about or your barber told you about. Someone once said when the guy who polishes your shoes is giving you stock tips, watch out a recession is coming. And I’ve been getting a lot of stock tips in 2022. Just saying.