Many people are reluctant to get into investing because they believe a huge time committment is needed. The truth is, however, while some individuals choose to spend a lot of time with investing, more as a hobby than out of necessity, relatively little time is needed to be successful.
Think of it like maintaining a yard. Some individuals may work to have a lush, green lawn and spend a lot of time fertilizing, applying weed and feed, and watering and mowing. They may also plant a flower bed with annuals every year, prune bushes into carefully manicured shapes, and even have a fountain. You’ll see these people out in their yards almost constantly since there is a lot of maintenance involved with this approach. If it all works out, they may have a very impressive looking yard.
If you don’t want to spend all of your time on yard maintenance, however, you can install landscaping fabric and apply preen each year to the beds. You can choose perennials that grow slowly and need little attention. You can fertilize your lawn maybe one a year, and keep things in the lawn to a minimum so that you basically have a rectangle to mow. With this approach you may spend an hour or two a week working on your yard, with perhaps a day or two every few years to replace the landscaping fabric and fix any issues that have arisen with your perennials. Chances are your yard will look almost as good as the guy who spends most of his off work hours working on the yard. If the high-maintenance yard is neglected for a few weeks, the low maintenance yard will actually look much better.
Investing is really the same way. If you are trying to time the market and make money on the small rises and falls in the price of stocks, it takes a lot of time. Do things like trading options, and missing a day or even a few hours can cost a lot of money. If you plant perennials, however – either buying companies for the long-term or buying a diversified set of mutual funds, you can do just as well (better most of the time, in fact) than the person who is constantly trading.
So how much time does it take? If you are buying mutual funds, you can set most things on autopilot, at which pint it may take a few hours a year to just make sure everything is still set up appropriately and to rebalance your portfolio. It will also require a little extra time purchases and sales to track things and fill out tax forms. With individual stocks it will take a little more time since you’ll need to choose stocks each time you have built up enough funds to take a new position and you may need to sell a few shares when a position gets too big, but it still doesn’t require more than an hour or two a week to glance at prices and make adjustments.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.