The Glacier Approach to Investing: How to Invest in the Stock Market

The Glacier Approach to Investing: How to Invest in the Stock Market

Originally Posted April 30, 2018

Updated on November 3, 2019

I love Finance, Math, and Competition. So it is pretty natural that I enjoy investing/trading in the financial markets. In this post, I’ll tell you a little about my background in the industry and then offer some simple, actionable advice for you to get started investing.

I’ve been trading for about 7 years now, (Can’t believe I can round up to a decade since I started) and I have hit most of the common pitfalls that the noob investor runs into when they don’t have a more experienced mentor. For the first year or two I was flying blind, with no help or guidance from anyone. I read finance blogs, watched stock market videos on YouTube, and tried my best to learn through books.

But trial and error turned out to be the best teacher for me, and it also got me hooked on the markets.

Read More: What is the Difference Between Stocks and Bonds?

When trading and investing, I take a very systematic approach. Today I will share some easy to replicate steps that I think will work for you just as well as they work for me.

Two of the most important things you need to remember are:

1. 1) “Time in the market beats timing the market”
2. 2) “Keep it Simple, Stupid.”

The correlation between effectiveness and simplicity is overwhelmingly positive when investing or trading.

That is not to say that more complex instruments are inherently bad, but not understanding them and then trying to leverage products that you don’t understand is extremely dangerous.

For most people, taking the “glacier” approach to investing in the stock market is the best. Here it is:

• Invest a fixed percentage of income every month and stop worrying about the fluctuations. Over time, you will go very far and acquire much more than you ever expected, just like a glacier. If you try to dance around and pick the best time to buy or sell, you will get absolutely crushed like the ice cubes that come out of the fridge.

To prove this point: Vanguard, the world’s largest money manager, did a study in which they calculated which of their customers performed the best over the past few decades.

The best performers? Dead People. Dead people made more money than any other investing population. It makes mathematical sense too, the money just sits there and compounds on top of itself over many years.

BUT there is one advantage we have over dead people, (well maybe there are a few but we will keep it related to Finance for now) and that is that we can ADD money into our accounts every week, month, year, etc.

In any market (gold, corn, housing, stock, farmer’s, etc.) there will be some poor performing years, and there will be some incredible years, but by and large over the course of our lifetime the stock market will go up.

This has been proven over the course of HUNDREDS of years. To think that “this year is different” would be terribly naive. In an investment sense, our global troubles are not as bad as we perceive them to be. The last century saw two world wars, the collapse of nations, the removal of the gold standard, and more.

The stock market still touts 1,800% returns from 1919-2019.

(Based on the Dow Jones Industrial Avg. being around ~1,439 in Nov 1919 and currently sitting at ~27,347 in Nov 2019. Refer to this site for more info on historical stock returns. To learn about how inflation effects stock market returns, click here.)

Ultimately, you have to get invested and stick to it in those bad years. Remember that the best performing investing population did SO WELL because they didn’t take any money out of their investments!

How do you actually get started investing?

It’s pretty easy, open an investment account with a brokerage firm like Robinhood (they are my go to recommendation because it is free and super easy to use) and buy a low cost, total stock market index fund. You can’t go wrong with stock tickers “VOO” or “VTI”. They are “exchange traded funds” run by Vanguard and have some of the lowest expenses in investing history.

For More Info: I dig into what ETFs are a bit in THIS post (Intro to the stock market)

This is a tactic called “dollar cost averaging”, which basically means buying a certain dollar amount of shares every month. For example, if you invest $500 on the second Friday of every month, you will naturally be buying MORE shares when stocks go down because they are cheaper to buy!

So you’re basically a pro now!

Keep investing month after month, year after year, and I promise you will call me in 20 years and offer to take me to a VERY fancy dinner. I like Italian food, by the way!

Check This Out: Here’s Why Michael Burry Says Index Funds are Dangerous

Don’t get scared off by the seemingly complicated world of investing, I try to equate it to driving a car. Do you know EXACTLY how your car’s transmission works? Or the suspension system? Maybe you do, but you don’t HAVE to know how the car works at the most detailed level to get yourself from point A to point B. I like to think of investing in the same way, you don’t need to know how to run a multifaceted discounted cash flow analysis to invest your money. Can you get that detailed? Yes, absolutely. Does it make you a better investor? Maybe, just like knowing how every little portion of your car works MIGHT make you a better or more efficient driver.

In the end, getting in the car and driving is the most important thing.

MDAS

If you thought this was helpful, terrible, or somewhere in the middle, please leave me feedback in the form of a Direct Message on instagram @MakeDollarsAndSense, or feel free to send me an e-mail/text to the information on my Home Page. I truly appreciate constructive criticism and opposing views, so bring em on!

P.S. New blog posts coming your way every Monday!

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