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Playing It Safe

Mike Zaccardi, 4:03 am ET

GROWING UP, my older brother beat me in just about every sporting match we played. Basketball, football, tennis—it was remarkable.

I noticed his key to winning was avoiding mistakes. Take tennis. My brother would casually return a soft lob over the net to avoid an unforced error. Meanwhile, I’d pretend I was Andy Roddick and go for the forehand winner every chance I got. My brother would simply watch as my aggressive shot landed outside the lines. Sure, I won now and then. But I shudder to think what my winning percentage was.

My brother’s strategy in sports—trying not to lose rather than trying to win—applies equally well to building wealth, as Charley Ellis notes in his bestselling book, Winning the Loser’s Game. It’s best to stick with tried-and-true methods. Invest automatically in your 401(k) and Roth IRA. Buy low-cost, diversified funds.

Admittedly, it’s easy to get bored with this approach amid today’s frenzied world of social media and nonstop financial TV. If you’re so inclined, you might try for a few high-risk winners with a small part of your portfolio. But realize that’s more likely to hurt your investment performance than help it.

Considering a high-risk strategy? Thinking about buying exotic alternative investments? The reality is, you’re much better off playing the percentages with plain-vanilla, low-cost stock and bond funds—because that’s the road that’s most likely to lead to long-term grand slam investment results.

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The Drake
The Drake
1 month ago

Never is a dangerous word.

Ormode
Ormode
1 month ago

I have chosen the option of buying individual stocks, but my portfolio is more conservative than the S&P 500. Yes, stocks like Southern, Verizon, Intel, and Merck are quite dull, but these companies will never go bust and will probably continue to pay a nice dividend.

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