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MONEY TALK Financial advice to take your money further. FINANCIAL FORUM


‘Buy Low’ by Design — and Reap Faster Profits


a regular and continuous basis. As an investment structure, it eradicates the impulse to “play the market.” With averaging down, there’s no more timing the market, no more figuring out when to invest in specific funds or trends, and no more being swayed by the crisis du jour. To do this, construct a port-


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folio with 60-100 percent stock funds. (Invest more if you’re younger and less if you’re older.) In the TSP, your stock funds are the C, S, and I funds. You’ll want


veraging down is the act of contributing to your investment accounts on


a portfolio specifically designed to follow the ups and downs of the stock market. You’ll need a stock-heavy


portfolio because only stocks can provide the necessary long- term returns to build wealth, and they have volatile up and down movements. For averaging down to work, volatility is essential — you want to ‘buy low’ on purpose. As the stock market falls,


your regular contributions will buy greater numbers of ever-cheaper shares. The more cheap shares you buy, the lower the average share price of your total stock portfolio.


RETIREMENT PLANNING


ior can reward you now — and get you on your way to a comfortable retirement. Here are the seven deadly sins of investing to avoid. Gluttony. An investor who


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hears about a “must have” stock might be tempted to borrow money and buy too much of a good thing. Greed. This clouds investor


judgment, creating a focus on profits and the mistaken belief that worrying about risk only leads to lost opportunities.


The ‘7 Deadly Sins’ of Investing Sloth. Lazy investors might


ood behavior on earth might get you to heaven, but good investor behav-


take hours deliberating on rela- tively meaningless decisions like which toaster to buy but choose investments based on a single de- tail, like, “How much does it pay?” Lust. Investors who fall head


over heels in love with a stock might think, “XYZ Corp. has been good to me!” and become so besotted they ignore fatal flaws until it’s too late. Envy. Investors envious of their friends who brag about how much they’ve made in the market might feel as if they’re missing


22 | MILITARY OFFICER | January 2018


out. Don’t be tempted to take risks to catch up. Wrath. After one bad invest-


ment experience, such as losing money in a down market, an angry investor might overreact and avoid professional help or refuse to sell stocks from a failing company for less than the pur- chase price. Pride. This is perhaps the


greatest investing sin. It gen- erates overconfidence in your abilities and, worst of all, makes you unable to admit you made a mistake. — By Capt. Kent Grealish, USNR (Ret), CFP®, AIF®


For related resources, visit www.moaa.org/financialcenter PHOTO: BOB LENNOX/MOAA


QUESTIONS? Send your


specific benefit and finance inquiries to beninfo@ moaa.org.


The result? You’ll break even and start to earn profits sooner as stocks eventually rebound from the bottom. If you buy a share for a dol- lar and then buy another share for 50 cents, this means your average share cost is 75 cents. You break even and show a profit sooner. In reality, you’ll end up buying a lot of 50-cent shares because you are essen- tially buying them on sale. This will result in lower average share costs — and faster prof- its.


Lt. Col. Shane Ostrom, USAF (Ret), is a CFP® and benefits information expert at MOAA.


REMEMBER: The market must go down so your regular contributions can purchase more cheap shares. Find the courage to believe in this strategy, espe- cially in a down market. The average people who do become millionaires in their 50s.


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