The 'Two Funds for Life' strategy simplifies investing with a target date fund and small cap value fund.
Saving monthly and understanding investment strategies are crucial for wealth building.
Maintain focus on long-term investment strategies despite market fluctuations and economic uncertainty.
Deep dives
Investing in Assets for Value Growth
Investing in assets that gain value is emphasized as a crucial defense against rising prices, influenced by outcomes of quantitative easing discussed in 'The Lords of Easy Money'. It is stressed that investing has become more vital and necessary now, highlighting the need to save money monthly for investing and acquire knowledge on investment strategies.
Importance of Saving and Investing Knowledge
Saving enough monthly to invest and understanding how to invest are highlighted as crucial steps for building wealth. Many individuals face obstacles in either saving sufficient funds to invest or lacking awareness about investment strategies, with particular focus on addressing the latter in the episode.
Challenges in Spending Habits and Earnings for Investment
The episode discusses common challenges such as living beyond means due to high expenses like luxury cars or lavish lifestyles. Suggestions are provided to increase earnings by seeking higher-paying jobs or venturing into businesses to create the necessary margin for investing.
Investing Strategy with Target Date Funds and Small Cap Value
The 'Two Funds for Life' strategy is introduced, advocating for a simple approach involving a target date fund and a small cap value fund. Paul Merriman's methodology stresses the 90-10 or 60-70-20 allocation strategy, aiming to optimize returns while keeping investment strategies straightforward and manageable for investors.
Navigating Investment in Market Uncertainty
Amid economic uncertainty and market fluctuations, the advice to remain focused on long-term, buy-and-hold investment strategies is highlighted. The episode underlines the resilience of historical investment strategies like those proposed by Paul Merriman, encouraging investors to stay committed and avoid being swayed by short-term market trends.
The best part about living in 2022 is the fact that you don’t have to know anything about investing to be a successful investor thanks to products like Betterment (and financial technology more broadly).
But what if you do want to manage your own investments? Then what?
Before I learned about Paul Merriman and Chris Pedersen’s Two Funds for Life strategy, I never really knew what to tell people aside from do your research and best of luck to you, madam.
So this week, I’m joined by Chris (who created the Two Funds for Life model) to talk about an amazing 80/20 solution for getting proper, low-cost diversification with only two funds (hence the name). Not only that, but the “rebalancing” is more or less taken care of for you.
