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5 Financial Moves I’d Make If I Were Starting Over

The earlier you start making smart financial choices, the better

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#5: Invest With (One) Eye on the Long Term

Fidelity mutual funds 401(k)Why do I say “one eye?” Because we’re back in an investing environment that bears some remarkable similarities to what I faced when I was starting out.

I bought my first stock in August 1973, just as the devastating 1973-74 collapse was getting underway in earnest. That baptism of fire taught me not to assume I would make money by simply hanging on to all my stocks and mutual funds through thick and thin. It was OK, perhaps, to keep a core position in the market at all times, but I had to learn how to trade around that core, raising or lowering my exposure at appropriate stages of the market cycle.

Many investors don’t want to embrace that insight today, even though it’s painfully obvious that the era of buy-and-hold is long gone (about 10 years gone). As a young person, however, you’re under no obligation to remain stuck in the outdated thinking of the 1990s. Ignore the self-serving propaganda of the mutual fund industry. Feel free to move your money around.

If I were launching an investment program as a 20-something today, I would begin by setting up an account with a mutual fund whose manager — rare among the breed — has a real grasp of today’s changed economic and financial landscape:  Mairs & Power Growth (MPGFX).  During the 2008 financial crisis, MPGFX did a far better job than most of its peers at preserving shareholder value, and the fund has continued to lead the gang since then on the way back up. After I had built up my balance to about $5,000, I would open an account with a discount broker like Fidelity or TD Ameritrade and try my hand at individual stocks. (My complete list of recommendations is available with a subscription to Profitable Investing.)

Global stocks should also perform respectably in the years ahead as the economic recovery now under way in the United States broadens out.  (By most benchmarks, foreign stocks are quite a bit cheaper than domestic companies.)

My favorite vehicle for accessing the whole world of equities is Oakmark Global Fund (OAKGX). Clyde McGregor, senior manager at Oakmark Global, is a seasoned veteran with a great long-term track record. You can trust him to keep a watchful eye on your money. As with Mairs & Power Growth above, I would average into OAKGX over a period of at least three or four months in the hope of catching at least one meaningful market pullback along the way.

In short, today’s troubled economy is no reason for young adults to give up hope. You can build a secure and prosperous future for yourself if you practice the five keepsake principles I’ve outlined here.

Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.

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