Truths and lies about individual investing

Much has been said about individual investing strategies. Here are 3 truths related to investing.

1. Making money requires taking risks.

When you invest, you are putting your hard-earned money in assets that you believe will grow in value over time. To make money with investing, your assets must grow at a rate greater than the rate of inflation.

To earn more than inflation, you must take on invest risk.

2. Active investing outperforms passive investing.

There are many pundits out there that advocate active investing — that is, picking individual stocks and timing the market.

In practice, however, few individual invest — even professional stock pickers — have the skill to beat the market.

According to Dalbar, the average mutual fund invest has earned 2.48% per year over the past 20 years, while the market average was 9.00% per year.

3. Your time is limited and valuable.

My time is limited and valuable. I value my time at $100 an hour.

If I have 3 hours available to invest, I will not be making more than $100 an hour if I invest. Therefore, I will only invest money if I have more than 3 hours available.