What experienced and successful investors know is that there are no shortcuts.
Most people are hardwired to look for shortcuts. The fastest way home from work. The most efficient way to mow the lawn. The chance to make our lives easier or more productive can be a positive in many work environments. It may also make you feel more accomplished in other aspects of your life as well.
However, when that same impulse is applied to the stock market, it takes a much darker turn.
People turn to shortcuts in the stock market because they want to become wealthier, more secure, or simply make up for lost time. This often takes the form of searching out stock tips or implementing complicated trading strategies. Both can asymmetrically skew your normal risk tolerance. Furthermore, it can lead to significant damage to your hard-earned money and your confidence if these investments go sideways.
Want to know a great stock market shortcut? Simplify.
Take something that’s extremely complicated or over-thought and distill it down to an easy process. That’s what exchange-traded funds do. They turned a burdensome, opaque, and expensive mutual fund into a transparent, low-cost, and tax-efficient vehicle. Game over.
You went from not knowing what you own or when it would ultimately be shuffled around to exactly what’s in every fund and what its key parameters are.
Think about it for a second:
- Minimal fees are a shortcut.
- Tax-efficiency is a shortcut.
- Transparency is a shortcut
- Liquidity is a shortcut.
These are the core fundamentals of the largest and most heavily owned ETFs in the world. They truly are the best shortcut available for long-term investors with diversified portfolios.
The important thing to remember is that ETFs aren’t a “get rich quick scheme”. They aren’t going to double in a matter of weeks or turn parabolic in their performance curve. They are simply going to give you the returns of the underlying portfolio of assets less a minimal fee.
One thing you can’t shortcut your way out of is time. The time to compound your wealth over multiple decades by investing through a disciplined process. ETFs can be the vehicle, but someone still must get behind the wheel and drive.
Many investors fail to implement them properly because they don’t have a plan. They chase performance, over-load in risky areas, or simply just don’t understand what they own to begin with. That’s an aspect of basically any market or investment vehicle that can only be managed through experience and education.
The Bottom Line
Stumbling into some lucky trades may give you the temporary illusion that you are on a shortcut to true wealth accumulation. The market will eventually humble that thought right out of your mind.
What experienced and successful investors know is that there are no shortcuts. It’s about time, tools, and discipline. The right combination of all three can lead to financial security through compounded returns.