{This is Part 1 of a 5-Part series. Please note that all information on YoProWealth.com is for informational purposes only. See a full disclaimer here.}
The wealthy do something well that the majority of the Middle Class do not do so well: invest.
Investing is hard. It is scary, and complex. We don’t know what to do, and we often don’t even know where to start.
However, it is an essential part to obtaining massive wealth. If you’re interested in having more money in your life, investing needs to be a top priority for you (see the power of compound interest here).
So, to help you master this touchy subject, I asked a bunch of experts for some helpful investing advice.
Their responses follow:
Agatha Javellana-Schmidt, Marketing & Business Development Manager, IRA Services Trust Company
Use Self-Directed IRAs (Individual Retirement Accounts) to build retirement wealth by truly diversifying your portfolio. Self-Directed IRAs allow you to invest in alternative assets like real estate including trust deeds (source of passive income), precious metals, private companies, and almost anything and everything you can think of that will make money for your IRA.
Another advantage of the Self-Directed IRA is that it allows you to earn tax-sheltered income – you don’t pay taxes until you withdraw funds from your IRA (as with a Traditional IRA), and if you have a Roth IRA, you don’t pay taxes at all on any investment returns because contributions are post-tax funds.
Patrick Randall, President and Founder of City Point Wealth Management, Inc.
Being a financial advisor and a graduate with a Masters and Bachelors degree in finance, you would think the best advice I have received or given would have something to do with a stock valuation formula or a technical trading technique, but it’s not. In fact, it’s far from that. The best investment advice I have received and since then been passing along to young and middle-aged clients is to invest in yourself and your career.
Think about it. By developing your skills and abilities, whether through additional formal education or self-taught, you are able to enhance your value as an employee (or better yet, an entrepreneur). By making yourself a more valuable employee, not only do you potentially avoid being the first employee cut lose when times get tough and your company needs to downsize, but you also increase the chance for higher income.
I encourage friends, family, and clients to continue to develop both personally and professionally. Look for ways to add value to your team, division, or company as a whole. Strive to take on additional responsibilities, even ones that you may not be 100% confident you can successfully accomplish given your current experience level. You’ll surprise yourself. You may not be the best at the additional task, you may even fail, but the lessons learned through the process are invaluable to your future growth and potential earning power.
Bradley Dugdale, Jr., Author, Munny Journey
When I started my first job, I had an elder statesman in the company pull me aside. He told me to live on 90% of my income and invest the difference.
Boy was he right. 32 years later his advice has created financial freedom most people dream of.
Barry Maher, Author/Speaker, Barry Maher & Associates
The best investment advice I ever received was simply this: “Start early!”
Over time, the power of compounding can easily turn small investments into large investments. The second best piece of advice I ever got came from John Bogle of Vanguard, and that’s to simply “buy the market,” using index funds that mirror the whole market or a significant segment of it, rather than trying to pick individual winners and losers.
Dustin Hall, MBA, CFP®, ChFC®, Wealth Advisor, Hall & Burns Wealth Management, LLC
A couple of thoughts I would share:
- You don’t have to recoup a loss with the same investment that caused the loss in the first place. What brought you down may not necessarily bring you back. It’s okay to sell a loser and put the proceeds back to work in another investment that may provide a better opportunity going forward.
- Always remember, anything you can make a killing in you can also get killed in. Bottom line: Don’t put all your eggs in one basket.
- Gains and losses are not symmetrical. For example, a 40% loss like the one many investors experienced in 2008 would require a roughly 66% gain just to get back even. On the other hand, a 15% loss would only require about an 18% return to get back even. Clearly, avoiding huge losses is essential when it comes to investing.
Christopher V. Kimball, Christopher V. Kimball Financial Services LLC
DO NOT pay attention to the media (present company excluded, of course!).
The media is designed to sell fear and panic. Making investment decisions based on emotion is almost always counter-productive. Develop a strategy that is suitable for you, and stick with it. Ignore the noise. No one can predict the future, no matter how many fancy charts and graphs he or she may present. Sure, an “investment guru” may be right once or twice, maybe three times if he or she is really lucky, but looking forward in the short-term, no one know what will happen next. Long-term trends can be instructive, but again, that is using logic and not get-rich-quick or stop-the-pain emotions.
Such great advice all throughout here. In summary:
- IRAs, especially Roth IRAs, are great tax-advantaged retirement options that should be a part of your wealth plan. (Taxes are most often the biggest expense that you’ll have – if you can master them, you’ll be well ahead of the game!)
- The best investment is, and always will be, in yourself.
- Live on 90% (or less) of your after-tax income!
- Start early. Compound interest is a powerful tool that the wealthy utilize, and it works best with time.
- “Buy the market” using index funds to capture diversification at a low cost.
- Don’t put all of your eggs in one basket.
- Big losses mean you need even bigger returns to get back to neutral.
- Whatever you do, base absolutely zero investing decisions off of the media. They are for entertainment purposes only.
I’ve been fortunate enough to make a lot of money in the stock market, but I have to say that I strongly agree that the best investment that you can make is in yourself.
Whether that means investing in your own education, skills, network, or if that means investing in your future by paying down debt or building your stock portfolio, it doesn’t matter. By you reading this article, you are investing in yourself. I hope that you keep it up.
