Building wealth takes time and there is no such thing as get rich quick. There are plenty of get rich quick schemes and you hear of someone who made millions off of something or other – Bitcoin, YouTube channel, winning the lottery. Whatever the avenue they are generally fleeting and if the person doesn’t invest the money properly there is a good chance that money won’t last. Lets look at some basic rules on investing:
Start early: Time is one of the most critical factors when it comes to building wealth. The earlier you start, the more time you have to let your investments grow. This means that even small contributions made consistently over a long period can add up to significant wealth.
Diversify your portfolio: One of the keys to reducing risk in investing is diversification. By spreading your investments across different asset classes such as stocks, bonds, and real estate, you can reduce your exposure to any one asset class and potentially increase your returns.
Invest in what you understand: Invest in companies and industries that you understand and are familiar with. This allows you to make more informed investment decisions and reduces the risk of investing in something that you don’t understand.
Focus on the long-term: Investing is not a get-rich-quick scheme. It’s a long-term game that requires patience and discipline. By focusing on long-term goals and avoiding the temptation to make short-term trades based on market fluctuations, you can build significant wealth over time.
Consider working with a financial advisor: A financial advisor can help you create a personalized investment strategy that aligns with your goals, risk tolerance, and financial situation. They can also help you stay on track and make adjustments as needed.
Control your expenses: The less you pay in investment fees and expenses, the more money you keep. Make sure to review the fees and expenses associated with any investments before making a decision.
Keep emotions in check: The stock market can be volatile, and it’s easy to get caught up in emotions when making investment decisions. Try to keep a level head and make decisions based on facts and research rather than fear or greed.
Building wealth takes time and some of us are starting later in life – this can be daunting. If you are young, you have time on your side – If you are older, hopefully you have a higher salary on your side. Whatever the case may be know that it is the patient investor who stays consistent, disciplined and is patient will build wealth over time.
ACTION ITEM: We want to start becoming more familiar with investing concepts. This takes time but it’s all easily doable when you take a genuine interest in your finances and are spurred on by the idea of never having to work again. Here’s a list of concepts we want to get familiar with but not be overwhelmed by:
- Stocks/Bonds – This is the investment tool that will help us achieve wealth. There are individual stocks but picking the right one can be tricky although really rewarding, we want to remember rule number 2 – diversify.
- Mutual Funds – These are a collection of stocks that can be actively managed or passively managed. There are mutual funds that track index’s.
- Index’s – S&P500 is an example of index that tracks the top 500 companies in the stock market. It is also a good gauge of how well the stock market is doing.
- Accounts – There are a number of accounts that can hold stocks and bonds. Through a work sponsored program like a 401(k) or government job would be a TSP or Thrift Savings Plan. These are offered through your employer and sometimes they even match to a certain percentage. There are also limits to how much you can contribute in a given year. An IRA is an Individual Retirement Account that anyone can open as well as a Brokerage account. An HSA is a Health Savings Account, this is available to someone who has a High Deductible Health Plan only.
We are just scratching the surface and will dig deeper in to all of these but for now, we are just getting an idea of some terms and what is out there.