The Best ‘Set It and Forget It’ Investments

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It’s often been said that the key to successful investing is to be boring. While stocks that double overnight and cryptocurrencies that soar to stratospheric heights are the ones that make headlines, the true keys to long-term success are patience and time.

The S&P 500 index, for example, has returned about 10% per year on average over the long run. While that type of return won’t make you rich overnight, it does mean that your money could double every seven years or so on average. If you start young and invest consistently, you could easily become a millionaire by the time you retire with those types of returns.

If that sounds good to you, take a look at some of these “set it and forget it” investments and don’t get too distracted by headline-grabbing speculative investments.

S&P 500 Index Fund

The S&P 500 is the most often-used proxy for the stock market as a whole, and it makes a great “set it and forget it” type of investment. When you invest in an S&P 500 index, you get a very low-cost way of accessing the market as a whole, and you’ll know from day to day (and moment to moment) how your investment is doing. 

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Many notable advisors recommend an S&P 500 index fund as the core investment of a long-term portfolio. In fact, no less than the billionaire CEO of Berkshire Hathaway, Warren Buffett, has long said that for most investors, a low-cost index fund is the way to go. While you’ll have to deal with the occasional bear market, over the long haul, the S&P 500 has proven to be the ultimate set it and forget it investment.

High-Quality Dividend Stocks

Individual stocks can carry risks, but you can reduce your portfolio’s volatility by owning an assortment of high-quality, dividend-paying stocks. These types of companies typically have a long history of strong and consistent cash flow that has enabled them to not only pay but also raise their dividends for 25 years or more in a row.

Companies that can manage this type of consistency are by definition well-entrenched in their respective industries and have recurring cash flow that isn’t likely to be stolen to any significant degree by any upstart competitors. These so-called “Dividend Aristocrats” tend to be very well-known consumer-oriented companies that generate sales even when the economy is tough, such as Wal-Mart, Johnson & Johnson or Coca-Cola.

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Select Exchange-Traded Funds (ETFs)

Exchange-traded funds can be great “all-in-one” investments because they offer a low-cost way to get the exact type of market exposure you want. Imagine, for example, that you want a diversified portfolio consisting of large-, small- and mid-cap American stocks, international growth stocks, emerging market stocks and global bonds and preferred stocks. With just a handful of exchange-traded funds, you can own all of these investments in a single account. 

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Best of all, you can generally buy as many ETFs as you want for no commission at all with online brokers, and the ETFs themselves may only charge 0.25% or less in terms of annual expenses, with some general market funds costing just 0.03% per year. [11] Some ETFs offered by Fidelity even have no annual expense ratio at all.

Your 401(k) Plan

While your 401(k) plan isn’t a specific “investment” per se, it may be the best choice you can make over your investment career. Not only will you typically benefit from tax-exempt contributions, your earnings will grow tax-deferred until you withdraw them in retirement. 

Contributions to your 401(k) plan are automated, coming out of your paycheck with no effort on your part. This makes it easy to stick to a consistent, long-term investment plan, which is one of the best predictors of investment success.

Best of all, most employers offering 401(k) plans also match a certain percentage of your contributions, which is the closest thing you will come to “free money” in your entire investment career. For example, if you put in $5,000 to your 401(k) plan, your employer might kick in an additional $2,500 to your account on your behalf. This immediate, risk-free 50% return is the best deal in the business.

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The concept behind the “set it and forget it” portfolio is that you should avoid overtrading your accounts and should always make consistent investments with an eye toward the long term. However, do realize that no real-world investment plan should really be “set” and forgotten about.

You should always keep tabs on how your portfolio is performing and that your investments are meeting your objectives while remaining within the bounds of your risk tolerance. In other words, review your statements and consult with your financial advisor at least once per year.

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About the Author

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.
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