“Do not despise these small beginnings, for the LORD rejoices to see the work begin.” – Zechariah 4:10 NLT
When the exiles from Israel returned to Jerusalem in the 6th century BC to rebuild the temple, the initial stage of the work seemed unimpressive. Disheartened, some Israelites “despise[d] the small beginnings.”
That’s human nature, isn’t it? Even though we know that any significant task requires foundational steps followed by steady perseverance, we want to skip all that and enjoy instant results. That’s rarely how things unfold.
First things first
Every builder knows that a structure’s strength depends on the quality of its foundation. Similarly, successful long-term investing relies on a foundation — a firm base of financial stability. That’s why each issue of the SMI newsletter features an article under the heading you see near the top of this page: “Strengthening Your Foundation.”
Becoming a successful investor doesn’t start with buying a stock or investing in a mutual fund. Instead, it begins with “personal finance” steps such as paying off debt and increasing savings. Prioritizing these matters is essential because low (or no) debt, robust savings, and healthy cash flow lay a foundation that isn’t dependent on market performance. This stable underpinning allows an investor to weather market reversals since there’s no need to sell investments at a loss to cover other financial obligations.
If your financial foundation is wobbly, focus your efforts in 2026 on strengthening it, as detailed below. In fact, if you have significant consumer debt and/or minimal savings, it might be best to pause your investing until you bolster your financial base. (Exception: If your employer offers matching funds for your retirement account, you may want to continue investing to at least receive the full match, even while working on shoring up your foundation.)
‘You are here’
When you use a map app on your phone, it first determines your location. Only then can it plot the route to reach your destination. Similarly, the first step in shoring up your foundation is to know where you stand. Among other things, you need to know how much consumer debt you have (credit cards, student loans, car loans, etc.). With that information in hand, you can develop a plan to pay off those debts as quickly as possible.
Also review your savings levels. Do you have an emergency fund equal to three to six months of living expenses? If not, focus on saving more and spending less until you reach your emergency-savings goal. (It’s also wise to save extra for items that come due only occasionally, like insurance premiums, and for “irregular” expenses, such as birthday and Christmas presents.)
Depending on your current financial situation, strengthening your foundation may take several years. Don’t lose heart. The effort spent on these crucial basic tasks isn’t wasted. Paying off debt and growing savings are essential for your future financial well-being.
Next steps
With a solid foundation in place, you can start building an investment portfolio in earnest. But before you do, SMI recommends creating a written investment plan that lays out your objectives and your approach. Such a document will help keep you on track toward your goals.
Where should you invest? If your workplace offers a tax-advantaged retirement plan, such as a 401(k) or 403(b), we encourage you to take advantage of it by having money automatically invested from your pay. SMI recommends using a dollar-cost-averaging approach, i.e., investing the same dollar amount with each pay period, irrespective of how the stock market is performing.
Many workplace retirement plans helpfully offer “matching” contributions. Policies vary by employer, but many companies will match an employee’s contributions dollar-for-dollar up to a certain percentage of salary. A dollar-for-dollar match is equivalent to a 100% return, even before the money is put to work in the markets!
The downside of workplace plans is that most offer a sharply limited selection of traditional funds and don’t include access to exchange-traded funds at all. That makes it difficult to implement SMI’s Upgrading, DAA, and Sector Rotation strategies. Still, workplace plans typically have the type of index funds needed to implement the Just-the-Basics strategy.
If you’re able to invest more money after contributing enough to receive the full employer match, SMI suggests opening an Individual Retirement Account. (All of SMI’s recommended brokers offer such accounts.) IRAs offer more investment choices than employer-sponsored retirement plans, so implementing SMI’s strategies via an IRA is relatively easy.
Deciding whether to invest through a Roth or a traditional account is a judgment call. With a Roth, you pay taxes upfront and can withdraw money tax-free in retirement. With a traditional account, you get a tax break now, but you’ll owe taxes when you withdraw in retirement. Both account types have advantages and disadvantages you should understand before choosing one.
One option is to use a traditional retirement account within your employer’s plan and a Roth IRA. This two-pronged approach will provide flexibility in planning the order of withdrawals in retirement. That said, younger workers are likely better off choosing Roths for both, now that almost all employers with retirement plans offer the option of Roth accounts.
Steady progress toward success
Becoming a successful investor is a long-term journey that typically begins small and then develops strategically. You can’t achieve success overnight.
However, if you consistently follow the steps described above and keep expanding your investing knowledge by regularly reading SMI articles, your finances will strengthen over time. So don’t despise small beginnings. Starting small is an essential part of the journey to success.
