Tag Archives: Building Wealth

Start Early to Build Wealth

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The single most important thing you can do to build wealth is to start early. Getting started is more important than becoming a financial expert and the easiest way to manage your money is to take one small step at a time.

You, like most people, do not need a financial adviser to help you build wealth. Instead, you need to set up accounts at financial institutions, such as Fideltiy or Vanguard, automate the day-to-day money management (including bills, savings, investing and paying off debt). And, you need to know a few things to invest in, and then be patient and wait thirty years for your money to grow.

But, that’s not cool or exciting. Instead of listening to the noise of the financial entertainment media, instead you want your money to go where you want it to go in accordance with your goals and values. You want your money to grow automatically, in accounts that don’t nickel-and-dime you with excessive expenses and fees.

It’s essential to start today to learn about building wealth and take small steps to save, invest and manage your money. You don’t have to be a genius or financial expert to build wealth. Successful wealth building takes time, discipline and patience.

What do I want to do with my life–and how can I use my wealth to do it!

Investing early is the best thing you can do; ‘doing nothing’ ranks right up there with trying to drive a car without tires; it’s a bad idea and it won’t get you anywhere.

The single most important thing you can do to build wealth is to start early.

Here’s a great example of why investing early matters, that puts it in numbers:

  • If you invest $5,000 every year (which is $417/month) for 10 years, from age 25 to age 35 and then never invest again, you’d still have more money at retirement, than someone who starts at age 35 and invests $5,000 every year until they retire.
  • The 25 year old starter invests $55,000 and ends up with $615,000 (given an 8% annual return, which is close to the average return of the stock market per year). The 35 year old invests $130,000 and ends up with $431,000.

So, remember the adage “The best time to start building wealth is twenty years ago. The second best time is today.” You can save and invest modest amounts, like $20 a monty, and over time realize thousands of dollars in gains.

There are a lot of societal problems, but it’s important to focus on what you can control. Don’t be a passenger in life. It’s a lot more fun to be a captain of your own ship, even if you go off course a few dozen times. Building wealth does require some work. But, the benefits and rewards will surpass the effort.

Take a long term view. The economy grows and contracts in cycles ( business cycle). Fear is no excuse to do nothing with your money. You cam automate your saving and investing, thus you can continue to save and invest whiles others respond to emotions of fear.

Investing for average stock market returns (8% to 9%) is great since most retail and so call smart money fail to beat the average returns of the stock market. Moreover, theses investors tend to do the things that guarantee their failure: trade frequently, make outlandish investments, incur high taxes and pay unnecessary fees. The single most important factor to building wealth is getting started.

The challenges and opportunities with building wealth, and the corresponding solution, are you. Your mindset, behaviors and actions are the number one problem.

  1. You’re the only one responsible for your financial problems.
  2. Know how much money you have coming in and then automatically direct it where you want it to end up.
  3. It’s essential to start early and to start investing today, even if it’s just $1.

References:

  1. https://fourminutebooks.com/i-will-teach-you-to-be-rich-summary/

Gratitude and Building Wealth

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“Be thankful for what you have; you’ll end up having more. If you concentrate on what you don’t have, you will never, ever have enough.” – Oprah Winfrey

Gratitude is the secret to building wealth! Why? Because gratitude turns what you have into enough. This is what makes gratitude a foundational element to wealth building. Gratitude allows you to find joy in what you already have. Keeping up with the Jones is the silent stealer of wealth.  Comparison is the thief of joy.  

Gratitude, the practice of appreciating all that the stuff you currently own, is an essential factor in building wealth over the long term. For example,

Gratitude allows you to appreciate and focus on the assets you already own.

“Gratitude in advance is the most powerful creative force in the universe. Most people do not know this, yet it is true. Expressing thankfulness in advance is the way of all Masters. So do not wait for a thing to happen and then give thanks. Give thanks before it happens, and watch energies swirl! To thank God before something occurs is an act of extraordinary faith. And that, of course, is where the power comes from.” — Neale Donald Walsch

The way to your best life is owning every moment and staking a claim to the here and now, according to Oprah Winfrey. “I live in the space of thankfulness — and for that, I have been rewarded a million times over. I started out giving thanks for small things, and the more thankful I became, the more my bounty increased. That’s because — for sure — what you focus on expands. When you focus on the goodness in life, you create more of it.”

Oprah says when she started keeping a gratitude journal more than 2 decades ago, it was one of the most important things she’s done. The daily practice of writing down five things to be grateful for balanced her life in subtle and inspiring ways. “It sounds simple,” Oprah says, “but when you go through the day staying conscious about what you put on your gratitude list, it shifts the lens through which you see the world.”

The practice of gratitude begins with being grateful for all the things you currently have – family, friends, experiences, and assets. Gratitude is focusing on all that you have and being thankful.

Wealth is much more than material things and owning assets. It is the presence of having a life filled with happiness in being, doing, and having what you want in life.

All too often, you fail to recognize your accomplishment because you are too busy moving onto the next task on your agenda. Yet, much of your success has to do with the people around you who have helped you focus on what’s important and helped you reach your goals.

Always remember, success, like wealth building, is a journey.

Building Wealth Takes Time

Some people are reluctant to make a wealth-building plan because they don’t want to wait 10 years. They would rather enjoy their money now.

The folly with this type of thinking is that most of us are going to be alive in 10 years. The question is whether or not you will be better off 10 years from now than you are today. Where you are right now is the sum total of the decisions you have made in the past. Practicing gratitude now can line you up for success and wealth building in the future.

Measure and focus on what you want more of. What you focus on expands.

You may think of money and wealth when you hear of measuring what you want more of, however; the same holds true for expressing gratitude. Make a list of things you are grateful for or write out what you are grateful for in a journal.

Complaining, blaming, or venting puts your focus on the negative things in life. You may wonder why some people seem more abundant than others.

To build wealth, it’s best to follow the two strategies that have the highest chances of success. And that is to practice gratitude, and to get into the habit of saving and investing early and to keep it up.

Gratitude is the key to building wealth

You might think building wealth is all about money, but it’s also very much about mindset. If you want to cultivate a money mindset that helps you build wealth, gratitude is a key component. Because gratitude can help shift your mindset from scarcity to abundance, help you spend less, and feel better. 

There is so much abundance in front of you if you choose to see it. The more you intentionally work to change your mindset, the easier it will become to see the abundance in life.

Actively practicing gratitude helps you realize how much you have to be grateful for right now instead of focusing on what’s missing. 

A scarcity mindset focuses on what’s missing and always wants more. It feels like there is never enough. This mindset can be harmful to your financial health because you can make poor decisions out of fear.

When you are in an abundance mindset, you realize your opportunities are limitless. You believe there’s never enough, instead you think there is always more than enough. Focusing on abundance can help you attract more money and have a healthier money mindset. 

Gratitude can help build that abundance muscle. Let’s say that you have a studio apartment but you dream of having your own 2-bedroom house. You don’t have the car you want now but imagine getting a Tesla. 

When you focus on gratitude, you focus on the fact that you have a roof over your head, that you’re healthy, and that your car still works instead of focusing on the fact that you don’t have a 2-bedroom house or Tesla yet. 

When you focus on gratitude and appreciate what you have now, you start to realize that you need even less than you thought. In today’s culture, we are conditioned to want more, to seek bigger and better, which of course affects our spending. 

Being content with what you have now can lead to less spending because you realize you have everything you need. That doesn’t mean that you can’t strive for more. It means that you can truly enjoy the journey rather than feel the emptiness of what’s missing. 

When you acknowledge and are grateful for whatever you have, it allows more to be drawn to you and changes the way you experience life. The more grateful you are, the more wealth that you have.

“Feeling grateful or appreciative of someone or something in your life actually attracts more of the things that you appreciate and value into your life.” — Christiane Northrup

References:

  1. https://debrakasowski.com/2014/02/22/what-does-gratitude-have-to-do-with-wealth-building/
  2. https://www.goalcast.com/7-oprah-winfrey-quotes-to-charge-your-day-with-gratitude/
  3. https://www.oprah.com/own-podcasts/oprah-winfrey-grace-and-gratitude
  4. https://www.newretirement.com/retirement/keys-to-building-wealth-after-50/
  5. https://www.thebalance.com/how-to-become-wealthy-356376
  6. https://grow.acorns.com/self-made-millionaire-money-habits/

Investing 101: Building Long-Term Wealth

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Managing your money and building wealth has to be a priority if you ever want to be in a better financial situation than you are today. Ramit Sethi

If you’re like most people, you probably think investing is something only people with a lot of money can do. But here’s the truth: anyone can invest and everyone should be investing.

Everyone with expendable monthly income should be investing. Even if you aren’t making major bucks and even if you are still paying your student loans, you should be investing. Investing is a great long-term wealth building option that yields major rewards if you’re patient and smart about your investments.

Despite what you see on TV and social media, you don’t need to be (or even have) a stockbroker to get in on investing. In fact, it’s easier than ever to go at it alone, thanks to platforms like Charles Schwab, E-Trade and Robinhood. These sites (and others) offer no or low fee options for individual investors to start building a portfolio. Even better, some also give you access to financial planners who can provide investing tips and help answer questions along your investment journey.

Ready to start investing. Below are six investing tips from Brian Baker, investing and retirement reporter at Bankrate.com.

1. Think about your investing goals. First, people new to investing should ask themselves one simple question before getting started: How soon are you looking to see a return on your money? Or, how soon will you need the money you’ve invested?

If the answer is sooner, like less than six months, then you should skip investing in stocks and instead put your cash in a money market mutual fund or high yield savings account. These options won’t offer as big of a return as investing, but you’ll see steady increases over time. More importantly, all of your money will remain relatively safe and still be there if you need it in a hurry.

On the other hand, if you don’t anticipate needing the money any time soon, then investing is a good option. Successful investing often requires a long-term approach and patience because the market can fluctuate. Over time, however, it often yields positive results for many investors.

Or, you can do both. You can put some of your expendable income in a money market mutual fund or high yield savings account and then use some for investing.

2. Consider how much you can afford to invest. If after you’ve paid all your bills and set aside some cash in a savings account, you still have money left over, great. You’re in the perfect position to start saving. While choosing how much to invest all depends on your personal expenses, investing 10% off your income is a great place to start if you’re able.

That last bit is important, though. Not everyone is able to invest 10%, and that’s okay. When you’re just starting out, invest only how much and when you’re able to. What you shouldn’t do is miss important bill payments or slack off on traditional savings just to put more toward your investments.

Another investing no-no? Prioritizing your investments over paying off your debts. This is especially true when you look at interest rates. While the money you invest may yield a 7-8% return, the interest rates on debt are often much higher than that. If that is the case with the debt you’re carrying, you should prioritize paying off your loans before putting lots of your money in the stock market.

3. Choose the right platform for you. Given the rise in popularity in investing, there are lots of different online brokerages and platforms for individual investors to choose from. Some of the most reputable and popular are Marcus Invest, SOFI, Acorns and Robinhood. Here are a few questions to ask when deciding which is best for you:

  • Are there account minimums? Many of the online brokers available to individual investors who are new to investing don’t have any account minimums, so most people can easily get started with whatever amount of money they have saved.
  • What are the account fees? You’ll want to find out if there are any fees associated with having an account with the specific online broker you’re interested in. Additionally, find out if they charge you for making trades or new investments. Platforms like Charles Schwab, E-Trade and Robinhood all offer commission-free trading.
  • Do they offer fractional shares? Many of the brokerages are also now offering fractional shares, which are great if you don’t have enough money to buy a full share of a popular stock like Amazon or Alphabet.
  • What investment research is available to you as a member? Chances are you’ll have questions as you begin investing. Some online brokers offer investment research to their members, which can be helpful when you’re just getting started.
  • What else do they offer? Some brokerages offer other services like tax planning or access to financial advisors. Others offer different types of accounts like retirement that might be of interest.

4. Start with a diversified spread. Rather than trying to buy shares from specific companies that are buzzy right now, new investors should begin their journey with a more diversified spread. Focusing too much on individual companies often means you’ll need to have an in-depth knowledge of that company and its long-term strategy or plans. Most novice investors don’t have access to that kind of information, nor the time required to acquire it. Thus, it’s better to start by putting your money toward an S&P 500 Index Fund. “That’s going to give you a diversified portfolio of U.S. stocks at a very low cost, and that can be purchased through a mutual fund or through an exchange-traded fund (ETF),” Baker explains.

5. Know when to check in on your investments. If you’re following the more traditional investment strategy above, where you’re putting some savings into a diversified portfolio each month, you really don’t need to check your portfolio every day or even every week. Because this is a long-term investing strategy, checking your brokerage accounts monthly is more than sufficient.

6. Steer clear of common investing mistakes. When you’re finally ready to start investing, it can feel exciting, like you’re finally getting in on the action. But don’t get ahead of yourself. Here are three of the worst things you can do when you first start investing.

  • Don’t trade often. “Lots of trading activity is not the path to long-term investment success,” Baker says.
  • Don’t obsessively check your account. “If you’ve made long-term investments, there’s really no need to check your portfolio every day,” Baker reiterates.
  • Don’t get overly emotional. “Emotion is another enemy of investment success,” Baker says. “No one likes to see their portfolio decline, but stocks are inherently volatile, and it’s inevitable they will go down sometimes. People should keep their eye on their long-term goals,” he adds.

In conclusion, investing can be confusing if you don’t know where to start. Everyone’s circumstances are different, which means what’s right for you may not be right for someone else.

Take the time to evaluate your personal investing options and choose what works best for you. And research shows that investing is the best way to build long-term wealth and achieve your financial goals.

“Keep your eye on the [long term wealth building] goal, keep moving toward your target.” ~ T. Harv Eker, Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth

References:

  1. https://www.intheknow.com/post/investing-tips/
  2. https://www.bankrate.com/investing/how-to-invest/

Differences Between Price and Value

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“Price is what you pay; value is what you get.” Warren Buffett

“Don’t judge a company’s stock by its share price.” Many people incorrectly assume that a stock with a low dollar price is cheap, while another one with a four-digit dollar price is expensive. In fact, a stock’s price says little about that stock’s value. Moreover, it says nothing at all about whether that the market price of a company is headed higher or lower.

The most important distinction between the ‘market price you pay’ and the ‘intrinsic value you get’ is the fact that price is arbitrary and value is fundamental.

  • Price is the amount paid for the product or service.
  • Cost is the aggregate monetary value of the inputs used in the production of the goods or services.
  • Value of a product or service is the utility or worth of the product or service for an individual.

To effectively deploy this strategy, it’s essential to find a company that you understand, that has solid fundamentals — then be patient and wait until the company’s stock price falls below its intrinsic value before you purchase the company.

Regarding ‘understanding’ a company, it’s important for investors to know how a company makes its money–revenue, profits and free cash flow.

At some point, a stock’s market price over the long term adjusts to its intrinsic value. This fact is how successful investors such as Warren Buffet have used to make billions over the long term.

“Finding differences between price and value is by far the most effective investment strategy”, writes Phil Townes, founder of Rule One Investing . “Not recognizing differences between price and value is also what causes many investors to lose their shirts, as companies are just as often overpriced as they are underpriced.”

How do you find companies that are on sale for less than their true value is to evaluate companies using a set of standards that look beyond the company’s current price tag. Phil Town call these standards the four Ms:

  • Meaning,
  • Moat,
  • Management and
  • Margin of Safety

The first step is to make sure you understand the company and the company you invest in has meaning to you as an investor. If it does, you’ll understand it better, be more likely to research it and be more passionate about investing in it.

The second step is to choose a company that has a moat. This means that there is something inherent about the company that makes it difficult for competitors to step in and carve away part of their market share.

The third step is to look at the company’s management. Companies live and die by the people managing them, and if you are going to invest in a company, you need to make sure their management is talented and trustworthy.

Finally, calculate the company’s intrinsic value and determine a margin of safety. Margin of safety is the price at which you can buy shares of a company, being more likely that you won’t lose money and have increased confident that you will make a good return on your invested capital.

When the market price of a company is lower than the company’s intrinsic value number, the company is deemed underpriced and represents a great investment opportunity.

“Leveraging differences between price and value is as simple as that”, said Town. “Find a company that you believe in, that has solid fundamentals — then wait until their price falls below their value. If you do this, you can buy companies on sale, sell them for their true value and make a lot of money in the process.”

The goal is to identify stocks that are undervalued—that is, their market prices do not reflect their true intrinsic value.

References:

  1. https://www.forbes.com/sites/forbesfinancecouncil/2018/01/04/the-important-differences-between-price-and-value/
  2. https://keydifferences.com/difference-between-price-cost-and-value.html
  3. https://www.investopedia.com/articles/stocks/08/stock-prices-fool.asp

The overriding goal is to help individuals learn how to successfully invest in assets, to build long term wealth and achieve lifetime financial freedom. 

Building Wealth

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Jack Ma the richest man in China said, “If you put the Banana and Money infront of a monkey. The monkey will choose Banana because the monkey don’t know that money can buy alot of Bananas.

In fact, if you offer Work and Business to most people, they will choose to Work because most people don’t know that a Business can make more money than salary.

One of the reason most people fail to build wealth is because they have not been educated or trained to recognise the entrepreneurial opportunity.

They spend alot of time in school and what they learn in school is work for a salary instead of working for themselves.

Profit is better than wages because wages can support you, but profits and owning assets can make you wealthy.

Source: https://www.facebook.com/109901988144184/posts/165519812582401/

4 Steps to Build, Manage and Preserve Wealth

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The requirements for building, managing and preserving wealth are simple, mundane and practical, if you choose to pursue it. The requirements are:

  • Commitment so that you prioritize the steps, habits and behaviors necessary to build wealth; otherwise, life will just get in the way.
  • Planning and creating systems based on proven principles and strategies that actually work.
  • Action because nothing happens without persistent, disciplined action over the long term to reach the your wealth goals.

What is “Wealth-Building?”

Wealth building is the process of generating long-term income through multiple sources. The sources includes savings, investments, and any income-generating assets. The wealth building definition requires proper financial behaviors, planning and goal,setting. Many individuals turn to wealth building as a way to achieve financial freedom and acquire cash flow to fund their lifestyle and retirement.

The 4 Steps to Building, Managing and Preserving Wealth

To build wealth, you must follow four simple steps: make money, save money, invest money and manage cash flow. Before investing, it is essential to have a reliable source of income. After securing a reliable source of income, it is recommended save regularly and paying yourself first. Finally, it is time to invest in assists and manage your cash flow.

1. Making Money

This step may seem obvious and is fundamental to wealth-building. A small amount of regular savings from your income can compound into a substantial amount. An important question to ask yourself is whether or not your current job can provide you with a regular amount of savings for 40 to 50 years. If not, it may be time to look for ways to increase your income.

The two basic types of income are earned and passive. Earned income comes from your employment, while passive income comes from investments. To increase your earned income, you may first have to make changes in your occupation. Consider investing in your education and other forms of training to help you become a stronger candidate for your desired job.

2. Saving Money

The second key to wealth-building is setting aside a portion of your earned income regularly. Once you have saved enough, you can start investing to grow passive income. Here are a few ways to to start saving money:

  • Keep track of your spending each month, and then eliminate the spending that you don’t need or does not align with your values
  • Adjust your budget to the point in which you’re saving every month.
  • Always have about 6 months’ worth of expenses saved in case of emergencies. Having a cushion will help prevent you from derailing your finances every time something unexpected happens.
  • Contribute to your retirement plan. If your employer offers a matching plan, definitely take advantage of it. Don’t leave free money on the table.

3. Investing Money

Once you have saved, you can start investing your money. However, to build a diverse investment portfolio, you will have to take a few risks. It is important to research how much asset allocation is appropriate for you. While you can do this research yourself, using a financial advisor is also recommended for new investors. They can help you gain clarity on your investment goals, time horizon, and how much risk you can stomach. Based on these insights, they can help you build a diversified portfolio that is risk-averse, moderate, or aggressive, based on your preferences.

4. Managing Cash Flow

Cash flow is king!

Your net worth, which is how wealth is measured, is an extremely important factor in wealth building. However, to live the lifestyle of your dreams, you must be able to generate positive cash flow from your wealth.

Cash flow is defined as income (cash in) minus expenses (cash out). And, the simpler your lifestyle and the better you manage your spending and expenses, the less income is required from your investments to live the life of your dreams and to achieve financial freedom.

To create a wealth building system, you can establish long term investing strategy and portfolio, and achieve financial freedom. Choosing the right wealth building assets comes down to which opportunities best suit your financial goals. With the right planning, investors can be well on their way to building, managing and preserving wealth.

In short, successful building, managing and preserving wealth are necessary requirements to achieve financial freedom. And, financial freedom buys you time and with time you can discover and experience what you really want out of life.

References:

  1. https://financialmentor.com/category/wealth-building/wealth-program-system
  2. https://www.fortunebuilders.com/wealth-building-assets/

Wealth and Financial Freedom Mindset

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A major factor regarding effectively managing your money and achieving financial freedom is maintaining a positive and confident mindset. Maintaining a positive growth mindset takes effort and knowledge. Here are some ways to start thinking about financial matters and building wealth:

Focus On What You Want – And Take It! So many people are too timid to admit they want something and go for it. When there is something that you want to accomplish don’t think “I could never actually do that”, think “I could do that and I WILL do that”. Play to win, not to avoid defeat.

This doesn’t mean to have to become a selfish jerk. What it means is becoming more assertive and honest with yourself. You don’t have to grab off other people. There is a big pot of unclaimed gold in the middle of the table — why shouldn’t you be the one to claim it? You deserve it!

Confront closely-held beliefs. Spend some time dissecting and understanding the previously-held beliefs you have about money. You learn a lot about money from your family at a young age—either that money is good or money is evil, for example.

Some people may grow up believing that money is a scarce resource, while others understand money as a tool. There are many numbers of qualities that get assigned to money that are not objectively true.

If you have major fear or shame regarding money, you may want to consider working through these emotions with a financial therapist. Your feelings are valid—but that doesn’t mean you have to live with them.

Integrate affirmations into your daily routine. You may find affirmations to be a grounding part of your day. For example, affirmations such as “I am worthy of wealth,” “I am capable of managing my money,” and “There is money out there to be made by me” could act as helpful reminders that you are in charge of your money and not the other way around.

To develop a positive mindset and to become a person who is “good with money”, it is essential to understand that achieving financial freedom and accumulating wealth is a journey. So, consider taking it step by step. Start by building familiarity with your financial situation, and look for small ways to improve it and make it better every day.

Don’t Spend Your Money – Invest It. The reason you need to save your money is to grow it by investing it for the long term. Millionaires tend to be frugal people, and that’s because they know the true value of money is in investing. Being your own boss goes hand-in-hand with building wealth. You’ll want to quit your regular job at some point.

Bottomline is to stop working for your money and invest, which puts your money to work for you.

Rather than buying yourself a new iPad, that $500 could be used to invest in the stock market. Find the right shares (more on that later), and that money could easily double within a year.

References:

  1. https://www.lifehack.org/articles/money/develop-millionaire-mindset-6-easy-steps.html
  2. https://www.sofi.com/learn/content/am-i-bad-with-money/

Things to Consider When Saving, Investing and Building Wealth

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Saving for the future, investing to grow your money and building wealth has little to do with the economic cycle, the stock market valuation or even how much money you earn.

It’s your mindset that can hinder your financial outcome and keep you trapped at an unsatisfying level of financial success. And, unless you can embrace a positive financial mindset, your ability to save, invest and build wealth will be hindered for the rest of your financial life.

The process of investing and wealth-building can be improved by a adhering to the following tips to set yourself up for potential financial success and freedom:

1. Start Early

It’s important to invest a percentage of your salary each month. And, starting early could be a way to dramatically increase your savings over time. The good thing about starting early is you can get the benefits of compound interest!

2. Set Investment Goals

Are you saving up to buy a house? Or putting money away for retirement? Investing with a purpose will help you determine the right strategy and keep you on track to pursue your financial goals. Determine your financial freedom number.

3. Know Your Time Horizon

If you think you’ll need the money within the next five years, you might consider less volatile investments, like fixed income securities. Investing for the long-term (think: 15 or more years)?  You might think about adopting a less conservative strategy.

4. Assess Your Risk Level

Knowing how much risk you’re willing to take on will help you narrow down your investment choices and keep you from letting your emotions guide your investing during periods of high market volatility.

5. Analyze Your Budget

Take your monthly income and take a list of your monthly expenses and create a budget (for instance, the popular 50/30/20 budget). By looking at your spending, you may discover extra money to invest each month.

6. Know Your Investment Choices

Familiarize yourself with different investment types to see what makes sense for you. Are you interested in international stocks and ETFs (exchange-traded funds)? Maybe bonds and mutual funds?

7. Go It Alone or Use an Advisor

If you’re the independent type, you may be drawn to Self-Directed Trading. Or if you prefer an advisor or to automate your investments with a Robo Portfolio.

8. Consider Avoiding Individual Stocks and Bonds; Invest in Market Index Funds

If you’re still learning the ropes, you might be more comfortable sticking to broader based investments like index funds and ETFs. These types of investments require less of your time and are less risky since they invest in numerous companies. As an alternative, an market index fund is an investment that tracks a market index, typically made up of stocks, like the S&P 500, or bonds. Index funds typically invest in all the components that are included in the index they track,

9. Diversify Your Portfolio

If all your investments are your company’s stock, and they go out of business, you’ll wish you had a diversified portfolio. You may reduce your risk by holding a variety of securities that react differently to market changes.

10. Think Long-term

History shows whenever the market takes a dip due to volatility, it eventually bounces back. Be patient and disciplined: Give your money time, make consistent contributions and wait out inevitable market downturns.

11. Don’t Forget High Interest Debt

School loans or credit card debt can make allocating money to investments a tough choice. It’s possible to reduce your debt and invest, and we can help you accomplish both.

12. Get Your Match

Many employers offer a 401(k) match, which can be a great incentive to invest for retirement, helping you to potentially build tax deferred savings.

13. Save and Invest for Retirement

When you’re young, retirement seems like eons away — but for many, regardless of age, now is the best time to start saving for your golden years. You may consider looking into Traditional and Roth IRAs to get started. The typical retirement strategy is built on the pillars of your pension, 401(k) plan, your Traditional IRA, and taxable savings.

14. Automate Your Contributions and Pay Yourself First

Pay yourself first instead of saving what remains after monthly expenses. Set up recurring investments to take advantage of dollar cost averaging. With this strategy, instead of trying to time the market, you invest the same amount each month — sometimes you might buy high, but other times, you’ll purchase low.

15. Beware of Fads

Just because everyone is jumping on the latest meme stock or investing app doesn’t mean you should. Fad stocks are often unpredictable, so if this doesn’t align with your investment strategy, feel confident to sit them out.

16. Be Informed

A prospectus sheet details the performance of a company to help you understand its stock performance. And digital tools can help you track your investments, too. If you cannot dedicate time to read and research, invest in a market index fund which is one of the easiest and most effective ways for investors to build wealth.

17. Don’t Neglect Your Emergency (or Peace of Mind) Fund

Investing grows your money and helps build long-term financial freedom, but you need to be prepared for short-term unexpected expenses. So when setting out on your own, don’t forget to start setting aside funds in an emergency (or peace of mind) fund. This money should be liquid (not invested in securities), so you can access it for unexpected expenses.

18. Watch Out for Fees

Some brokers will charge a commission fee whenever you buy or sell stocks, which add up and make a dent in your overall returns. Trade U.S. stocks and ETFs commission-free with our Self-Directed Trading.

19. Ask for Help

Investing can get complicated. Don’t be afraid to reach out to a financial advisor for advice and support.

20. Adjust as You Go

As life circumstances change, it might make sense to move your money into different types of investment accounts or change up how much you contribute. Any time your financial circumstances change, remember to reassess your financial goals, plan and investments.

21. Create and Follow a Financial Plan

Every living adult needs to financially plan. A financial plan is a comprehensive overview of your financial goals, net worth, cash flow, debt, taxes, risk tolerance, time horizon and it provides the steps you need to take to achieve and manage them.

22. Investing has risks.

No one knows exactly what will happen in the future and investments could lose money, so be aware of how much you are able to invest and be comfortable leaving it there for a period of time since it may have ups and downs.

23. A Wealthy (or Positive Financial) Mindset

It’s imperative that you refocus your mindset and change how you think about yourself, your finances, and the world around you. If you keep thinking about things the same way, you’re going to get the same results. Change in the world around you doesn’t happen until you change yourself. Embrace and grow your positive financial mindset about money, wealth and financial freedom.

Getting Started

Getting started is often the hardest step for most new investor to take, but starting to invest today is advice worth implementing! “The best time to plant a tree is twenty years ago; the second best time is today.” And, what’s true for a tree is also true for growing your money.

References:

  1. https://www.ally.com/do-it-right/investing/things-to-know-when-investing-in-your-20s/
  2. https://www.harveker.com/blog/11-principles-infographic-financial-freedom/

Growing Your Money

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When investing your money in the stock market, doing your research and investing in what you know are crucial elements of successful investing. You don’t have to be a financial expert to start buying stocks, but the more you know going in, the more likely your investing journey will be successful.

It’s critical to understand that stocks represent legal ownership in a company; you become a part-owner of the company when you purchase shares.

People ultimately invest in stocks with one end-goal in mind: to grow their money and build wealth.

But it’s important to note that growing your money and building wealth are not guaranteed. Investing in individual stocks carries much more risk than buying bonds or putting your money in index funds.

As you begin to research stocks, first know how much risk you can take, or your risk tolerance, and your time horizon.

Financial experts typically recommend that you only invest money that you can afford to lose and, since investment returns are typically maximized over the long term, only invest money that you won’t need in the short term (less than three to five years).

Stock’s Value vs. Price

Buying stocks equates to owning companies which lets you be a part of something that’s normally very exclusive. It allows you to invest in pieces of well-known companies, such as Amazon, Google or Apple.

A company’s stock price has nothing to do with its value, because the share price means nothing on its own.

The price of a stock will go down when there are more sellers than buyers. The price will go up when there are more buyers than sellers.

A company’s performance doesn’t directly influence its stock price. Investors’ reactions to the performance decide how a stock price fluctuates.

The relationship of price-to-earnings and return on equity is what determines if a stock is overvalued or undervalued. Essentially, You should make no assumptions based on price alone.

Knowing when to sell is just as important as buying stocks. Most retail investors buy when the stock market is rising and sell when it’s falling, but smart investors follow a strategy based on their financial plan and requirements.

Benjamin Graham is known as the father of value investing, and he’s preached that the real money in investing will have to be made not by buying and selling, but from owning and holding securities, receiving interest and dividends, and benefiting from the stock’s long-term increase in intrinsic value through compounding.

Learning how to invest in stocks might take time, but you’ll be on your way to growing your money and building your wealth when you do so. But, keep your risk tolerance, time horizon and financial goals in mind,

References:

  1. https://www.thebalance.com/the-complete-beginner-s-guide-to-investing-in-stock-358114