6 Best Minimalist Investing Tips for 2021

Should you concentrate your capital on only a handful of research-supported stocks? Or do you spread your funds over a dozen or so stock selections? Should you fly in and out of stocks all day? Or do you buy and hold? Indeed, with more people investing than ever before, these are reasonable questions to ask. 

But, in our opinion, there is only one correct answer if you wish to be a successful long-term investor: minimalism. By allocating the minimalist philosophy – simpler is better and more fulfilling – to your investment strategy, you will see the results as early as a few months (and you’ll keep seeing them over time). 

Minimalist investing is perhaps one of the best paths to long-term success. You concentrate on a handful of stocks within which you have the utmost confidence, you automate your plan, sign up for better accounts, and embrace the boring. This might not be as exciting as the hustle bustle and adrenaline of working in the New York Stock Exchange, but it will produce results that will give you an enviable nest egg in your winter years.

So, what measures do you employ to be a minimalist investor? Here are several tips for 2021: 

1. Limit Stock Picks to Five 

For many novice investors, it is always a good idea to limit your stock selection to five. Unless you have millions of dollars to invest and an income a la Warren Buffett or Charlie Munger, there is no reason to have a portfolio of ten, 15, or 25 stocks. The reasons for this approach vary: some will argue that it prevents you from having the flexibility to allocate enough money in a stock to see a handsome return, and others will assert that you’re stretching yourself too thin. Both are correct! The key is a balanced portfolio whereby each ticker represents 20 percent of your investments. Sure, this approach may not be exciting, but it is effective. 

2. Select Three Index Funds 

Are you an index fund type of investor? Your friends might poke fun at you because they are in and out of positions all day long with their free brokerage platform. But indexing has proven to be the most effective investment strategy rather than choosing individual stocks. 

Index investing is when you buy a pool of stocks that mirror the composition of an index, such as the S&P 500 or the Nasdaq Composite Index. This works for a myriad of reasons, mainly because indexes typically go up over time, and you can save money on fees and other egregious charges. 

Unsure what index funds to consider? Here are a few options at your disposal: 

• Vanguard S&P 500 ETF (VOO) 

• iShares Core S&P 500 ETF (IVV)  

• Fidelity ZERO Large Cap Index (FNILX) 

• Schwab Total Market Index Fund (SWTSX) 

3. Automatic Savings Program 

Do you not have time to monitor the stock market routinely, watch CNBC all day long, and dollar-cost average (DCA) your investments? Well, if that is the case, it is a great idea to automate your savings and investments through an automatic program. 

You may already be aware of an automatic savings program (ASP) that allows you to transfer funds from your checking to your savings every week or month. But you can also do this with your investment account by permitting your financial institution to put your capital from your checking into your investment account! 

Of course, you can also buy mutual funds that automatically buy units in investments from your chosen account. Just set it, forget it, and let your savings grow! 

4. Change Accounts 

While checking accounts are crucial for day-to-day transactions, they can also be bad for your money. Most checking accounts do nothing for you, and many of them cost you a chunk of change every month, especially if you use one of the big banks rather than a smaller online-based outfit. Put simply, it might be time to change accounts as part of your minimalist investing journey in 2021. 

But what are your options? Indeed, the fintech sector has done a remarkable job of forcing the banking industry to give consumers more choice. Now you can choose an all-in-one checking and investment account, or perhaps a free mobile trading platform, or a bank account that pays monthly interest…the options are a lot more diverse than they were a decade ago, which is great news for conscious consumers! 

5. Invest in REITs 

Real estate investing is a long, complicated, and expensive endeavor. In addition to the upfront capital, you also need to pay various taxes, fees, penalties, and the list goes on. But since real estate investing is one of the most lucrative ways to make money, you might still need to prioritize it. 

A real estate investment trust (REIT) is one of the greatest mechanisms for earning a regular income and garnering some exposure to the residential or commercial real estate sector. You do not have to do any heavy lifting since a REIT is a company that owns and operates properties and pays shareholders a monthly or quarterly dividend. This minimalist investor approach can be a great long term strategy for financial growth. 

6. Be Boring with Your Investing

Sure, the meme stock ride has been a lot of fun on Reddit’s Wall Street Bets page. But is it a sustainable strategy? Indeed, many investors made money, but just as many did not because they got caught up in FOMO and YOLO. Sometimes being boring with your investing is a safer, smarter option. 

As legendary billionaire Warren Buffett said, “Beware the investment activity that produces applause; the great moves are usually greeted by yawns.” And he is right. 

For example, if you purchased oil stocks at the bottom of the 2020 market meltdown, and you continually added shares whenever you could, you would be sitting on a goldmine right now. Sure, it is not GameStop or AMC, but this tiresome investment technique lets you increase your portfolio size and potentially earn a quarterly dividend. 

Index funds are boring. REITs are boring. Value stocks are boring. Embrace boring; it’s the minimalist investor’s secret to success! 

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