HOW TO INVEST & GET RICH (SLOWLY)
A version of this article was published in June, 2011
Download my free eBook, 20 Minute Guide to Investing. It’s easy reading and will get you started towards prosperity.
Investing is Not a Get Rich Quick Scheme
“Cash confiscates capital. Long term, after taxes and inflation, the return on cash is negative.” Catherine Keating
When you factor in the impact of inflation, you must achieve a return on your investments of greater than 3 percent or you are losing money.
With today’s difficult economic conditions, wages stagnating, and unemployment still rather high, it’s more important than ever to spend money sensibly. No matter how much you earn, it’s easy to spend it all.
Save and invest a small amount of your income, and over time you can become wealthy.
There was a guy written up in the newspaper who made $100,000.00 per year. He lost his job and couldn’t find another. His only savings were $5,000.00. But, he had a great looking car and lots of fancy gadgets. These items did him no good when he was unemployed. Financial ruin was knocking at his door. Don’t be that guy!
With a small amount of saving and some smart disciplined investing, you can amass great amounts of wealth.
Learn how long it takes to meet or surpass your financial goals.
- Save monthly.
- Divide Savings among STOCK (60%) and BOND (40%) investments. The historical average annual return of 60% stock funds and 40% bond funds is 7.4%. To be on the conservative side, I’m going to assume an annual return for this portfolio of 7%.
- Investment returns over the next 20-40 years approximate historical averages; STOCKS 9% BONDS 5%
HOW LONG WILL IT TAKE?
At an annual return of 7% per year, how long until you are wealthy?
|How Long Until I’m Wealthy?|
|20 years||30 years||40 years|
If you save $100 per month, in 40 years you will have $242,481.00. Increase that to $800.00 per month and you’ve got over 2 million dollars after 40 years investing.
Drop your monthly investment to $500.00 and invest for 30 years. You still wind up with a nest egg of over $600,000.00. Not bad.
Empowerment-It’s in your Hands
Finding the balance between spending and saving leads to pleasure now and future security.
In talking with a book editor the other day, he explained to me that the best selling books were about trading options and market timing. He said, basic personal finance books were not selling well. I was so distressed with that information because basic and simple investing strategies lead to greater investment success than fancy market timing and trading strategies. The modern portfolio research substantiates this fact.
Sure, a few lucky folks manage to beat the market returns of a passive index based investing approach every year or so. But, long term, very few individuals or investment companies can beat this basic approach.
If you are patient and disciplined you can be the one with a six or seven figure investment portfolio upon retirement. There are lots of folks who make that goal in even less time.
LEARN ABOUT INVESTING
Download my free eBook, 20 Minute Guide to Investing. It’s a quick read and will get you started toward a wealthy future.
Barbara Friedberg Personal Finance teaches WEALTH BUILDING SKILLS. Pay attention, be patient, don’t overspend on stuff that doesn’t last; save, invest, and you can become rich. Take action to hit your wealth target.
Can’t Get Enough Index Investing?
- Consumerism Commentary; How do Finance Professors Invest?
- Money Chimp; Index Funds & Optimal Portfolios
- Balance Junkie; Passive Investing & the Ostrich Effect
- Monevator; 9 Lazy Portfolios for Passive UK Investors
- My Personal Finance Journey; Was the Lost Decade Really Lost for Investors?
- The Digerati Life; Manage Risk with Diversification