The stock market continues to perform well.
As long as the stock market continues to climb, everyone is excited. (clap, clap, clap).
People fully invested have increased their net worth as of late, but half the population still stays away from putting their money in the markets.
Let’s face it: people are scared they will lose money. Markets must correct and go back down at some point. Having patience and staying calm during market fluctuations can be hard for some people to stomach. However, the good news is that they always move into new high status at some time in the future.
If you have been thinking about getting into the markets but don’t quite know how, or you are thinking about putting more money into the markets, here are a few ideas so you can put the odds in your favor to build a nice nest egg for yourself.
1. Just getting started
If you can get into the habit of putting money away every month, whether that is in a 401K, IRA account, or your own investment account you are doing something that will reward you later. This is a hard concept to grasp because we as consumers are not used to it. We would rather experience immediate gratification, instead of delaying something beneficial for the future.
I often time advise clients to start small. I have even advised clients making six figures that were previously struggling to save money to put five dollars a month into an investment account as a starting point. It is all about the consistency of a habit that is important. Then, that five dollar turns into $100 then $500 then $1000 every month because the habit turns into a priority in their life that becomes manageable. Big changes always start small.
2. The Advisor is yourself
Investing on your own was non-existent decades ago. A half century ago, self-directed investing was nonexistent. Using a stock broker through a big brokerage firm was the norm. Expensive commissions ate away at any gains. Today, all of that has changed. The internet has been a big factor in the emergence of the discount brokers. Paying only $4.95 a trade is not uncommon. There are good financial advisors out there, but everyone can do it on their own with a little education. There is a plethora of information on the internet and cable television teaching you how to invest. My favorite show is Mad Money on CNBC.
3. Keep it Simple
KISS really does work in the stock market. “Keep It Simple Stupid.” Investing need not be that complicated.
Through the years, I have come across some investment experts that have offered their pearls of wisdom that make sense for people to build wealth. Warren Buffett, Jim Cramer, and Dave Ramsey are the go-to experts for that advice.
a. $10,000 or less to invest
Jim Cramer, co-founder of financial site TheStreet.com and host of CNBC’s Mad Money, advises putting your first $10,000 in an index fund. Cramer even advises his kids to put money into an index fund called the Vanguard 500 Total Return Fund. That is the simplest way to get started, and you will be well diversified while keeping the fees to a minimum. Once you have built an investment account up to $10,000, you can put further investments into a small basket of stocks to buy. Check out TheStreet.com for those stocks.
b. Called “The Million-dollar Bet”
Warren Buffet, the Oracle of Omaha, is set to win a $1 million dollar bet. Buffett bet in 2007 that a Vanguard S&P 500 index fund would beat five hedge funds selected by Protege Partners, a hedge fund, over a 10 year period. Currently, Warren Buffet is winning big time, and the outcome of the wager will conclude at the end of this year.
Buffett advises on an investment plan that is simply putting 90% of your money in a low fee stock index fund and 10% percent in short-term government bonds.
c. Financial Peace
Dave Ramsey, the Personal Finances Radio star and creator of Financial Peace University, advises investing in 4 mutual funds. In the Dave Ramsey mutual fund investment strategy, he urges investors to invest in – one Growth fund, one Growth & Income fund, one Aggressive Growth fund and one International fund. Furthermore, he recommends the mutual funds’ past performance has a good track record.
The stock market will continue to go up and continue to fall. You are your own best financial advisor. I have laid out some great strategies for you to build wealth. Keep it simple and remain calm. The financial markets are there for you to win with your money.