Siena Wealth Advisors’ Top 5 Investment Principles
It seems that everyone and their brother-in-law have advice on investments and financial planning, but what do investment and financial planning experts have to say is important indeed, essential to know.
1. Start now. The magic of compound interest requires money, a rate of return, and equally important, it requires time to grow and compound. For example, two people invest the same amount of money toward retirement, say $20,000, both earn the same average annual rate of return, say 8 percent, and both desire to retire at age 65, but one starts at age 25 and the other at age 35. How much more will the person who started at 25 have than the person who started at age 35? More than double, $434,490 compared with $201,253.
2. Avoid the totally avoidable cost of commissions. A recent study by finance expert Larry Swedroe determined that the expense of actively managed mutual funds which are the bulk of mutual funds active managers attempt to buy and sell the right stocks at the right time can be as high as 5 percent or more per year. These often hidden costs come from operating expenses, cost of cash, commissions, market impact costs and taxes.