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31 Aug 2009

Save Money by Doing Nothing. Literally.

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by Jesse Mecham

John Bogle wrote something interesting in The Little Book of Common Sense Investing:

“The way to wealth for those in the business is to persuade their clients, “Don’t just stand there. Do something.” But the way to wealth for their clients in the aggregate is to follow the opposite maxim: “Don’t do something. Just stand there.”

I thought it would be interesting to see the impact that market timing (in a very unscientific way) might have on a person’s theoretical return during the prior decade. To do this, I looked at the returns from the Dow Jones Industrial Average (DJIA) and then pulled out the top five daily returns.

If you invested $100 on the 27th of August 1999, ten years later (August 28, 2009) it would be worth $86.06.

What if you had been out of the market for the five highest-returning days of the prior decade? Your $100 would be worth $57.55. What’s also interesting is the fact that the five highest-return days were from October 13, 2008 to March 23, 2009 — a period of just five months!

Take the easier, less stressful, intelligent, rational road when it comes to your investing. Buy and hold. Just invest and do nothing.

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Remember, budgeting is not restrictive. You won’t be spending less, you’ll be spending right. You can do this! Today. Right now. What do you have to lose? Except all that debt and stress. (Ok, so kind of a lot.)


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