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What Is "Investing" and How Can I Participate?
If you want to a crack at the big bucks but aren't 7 feet tall with a smooth jump-shot or a square-jawed Hollywood big shot, you need to invest.
There are many different methods of investing from baseball cards to stocks, comic books to silver. Truth be told, you can invest in anything you anticipate will increase in value over time. I would estimate, however, that a great majority of investors build their life and wealth around the stock market or real estate. Entrepreneurship or small business ownership is a close third option. Technically, you can invest in nearly anything understanding that not all investments are not created equal. All you really need is just one person willing and able to purchase something at a higher price than you originally paid to have a positive investment. If you purchase something that is not reasonably expected to increase in monetary value over time, then you are probably making a poor (or negative) investment. Investing is essential for wealth building
So where do you start? What are the very first steps of investing if you are a beginner?
If you are just starting out, I suggest you begin doing some light reading in the areas of personal finance and investing. Reading this blog is a great start and take a look at some of my all-time favorites on personal money management. ducate yourself. Read, study, and immerse yourself in money management, investing, and personal finance. It is imperative to understand money I am not saying be the next Warren Buffet and read financial statements all day for the next 80 years, but educating yourself would be a good place to start. The two most common investment options, both with fairly small barriers to entry, are investing in the stock market or real estate. How do you invest in the stock market?
You actually have many options. Wall Street and the stock exchange began in 1792 under a buttonwood tree and involved actual in-person trading of securities.
Nowadays, nearly everything is done online. To open any individual retirement accounts or brokerage accounts, I like to use Fidelity or Vanguard for my account. For workplace plans, you may not have the option of either of the aforementioned so work with your HR department and a financial advisor in discovering what approved vendors you have for your 401(k)'s, 403(b)'s, and other deferred compensation or pension plans. The primary types of accounts to invest in stocks are:
Again, for IRA's and brokerage accounts I always have used either Fidelity or Vanguard, but the choice is entirely yours to make. These two vendors give you access to some of the lowest fees and expenses available in the industry. My favorite funds to own for each company are listed below. Disclaimer: This is not investment advice.
If you have any trouble figuring out how to purchase stocks and index funds, or how to transfer money into these accounts, call your investment company or financial advisor and ask how to get started purchasing these securities. Vanguard and Fidelity have some of the best customer service departments I have experienced yet. What's the long-term plan once the first investment is made?
My personal preference is to "set it and forget it". I add money to my account incrementally over time and continue to purchase my favorite stocks and index funds in expectation that they will dramatically increase over time. I typically set my investment horizon for at least 20 years, especially my index funds, where I do not expect to sell or withdrawal any of these securities for 20 years or more.
A common long-term for the financial independence community is to continue the aforementioned, year after year, until you have enough money to cover your expenses My plan is to do this year after year until I am ready to start withdrawing this money which will be when I no longer need to work for money and can live off investment income. Please, do not worry about timing the market. Do not worry about crashes. Do not worry about corrections. Just invest in low cost index funds for life and allow your money to compound over time. Use caution when you have anybody telling you they have access to unique metrics and can protect you from market crashes. Unfortunately, actively managed portfolios rarely ever beat passively managed ones. Guess what, they don't. Their "pick of the week" and "insider information" has never historically proven to be accurate. Consider that almost every single long term investment advisor has failed to even match the returns of the S&P 500. That's why I choose to invest in index funds to allow me to match the S&P 500 thereby beating 95% of all professional investment advisors. What About Real Estate?
I have not personally began investing in real estate as of 2020, but I expect that to change over time.
One of the best real estate investment books I have read is How to Buy and Sell Real Estate for Financial Freedom by James and JW Hicks. The two most common real estate investment strategies are:
These two strategies oppose one another greatly. Long-term rental strategies are geared for those looking for many years of residual rental income and who do not mind either managing the properties themselves or paying somebody else to do it. "Fix and Flip" is exactly what it sounds like. Buy a crappy place for cheap, fix it up either yourself or with low cost contractors, and sell it for a profit after factoring in expenses to fix it up. In Closing
Regardless of how you start investing, whether it be real estate, stocks, or otherwise, you need to get your money working for you as early in life as possible.
The most assured way to generate significant long-term wealth is saving and investing. Boring? Maybe. But you can laugh your way to the bank someday when you are counting all the zeros behind a big number in your investment accounts. Related ArticlesComments are closed.
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