I’m a big fan of Jimmy Fallon and his Late Night talk show. I was watching his show the other night when he had Justin Timberlake on as a guest. Fallon made a comment about how hard Justin Timberlake has been working over the last year. I like both of these guys because they are extremely talented and entertaining. But still my immediate reaction was:
“Of Course! If you are good at what you do it’s easy to work hard!”
Being the self aware person that I like to think I am I had to step back and ask myself why I had just had that reaction.
I’ll keep my thought process short. If someone enjoys what they do and is good at what they do then they are likely to spend a lot of time doing it. That is true whether the activity makes money or not because it provides so much enjoyment and fulfillment.
If a person enjoys doing the investment work required to be a successful investor then they have a really good chance at becoming a successful investor. If they don’t like doing this work then they are better off investing in ETFs and Index funds.
Choosing to invest in ETFs or funds over individual stocks does not mean someone is lazy or incapable. It means they know their limits. I personally own a few ETFs that give me broad exposure to specific emerging markets like Poland (PLND) or the Philippians (EPHE). In each of those situations I do not want to try to pick 1 or 2 winners when I can get exposure to a more macro economic story. It could prove to be a wise decision in the long run because it can still be a great way to build wealth. Sure there will be less control and extra fees but these vehicles still could be the best option for an individual or specific scenario.
It takes time to develop your investment rules, strategy and process. It also takes time to learn from mistakes and become an expert. Someone starting late in life may not have time or the risk tolerance to become an expert. In this case they would also be better off investing in well managed ETFs and and low cost index funds.
It also takes a lot of discipline and patience to stick with a plan. I know for me personally it was not easy to sit through the market selloff in 2008 and 2009. I had to hold tight and stay convinced on my long term thesis where it still applied. All through 2009 and 2010 I saw opportunity and even though I was concerned I continued to max contributions to my 401k and look for new money to invest in a beaten down market. I know many people who sold at the bottom when they just couldn’t take it anymore. For me it was easier to make it through the downturn because I have a long term perspective. Later my risk tolerance may change and when it does I’ll need to adjust my strategy and investment plan.
What do you think? What does it take to become a skilled dividend investor and when is it better to stick to ETFs and Funds?