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I normally write longer blogs with numerous detailed examples, sources, quotes, and content.
I’d thought I’d mix it up and provide a short, simple, and straightforward guide on how to invest your money.
Getting rich takes time, but it isn’t hard. Here’s how.
Invest As Early As You Can
This is by far the easiest step. Invest as early as you can so you can take advantage of compound interest. All you really need to know is that compound interest allows you to earn interest on interest.
If you have $10 to invest, and you get a return of 10%, you now have $1.10. If you reinvest that $1.10, you now have reinvested that interest and are earning 10% on that $1.10.
Multiply this over and over again, add some zeroes, and you’ve got serious money on your hands.
The key here is time. The longer you allow compound interest to work for you, the more money you will make. Compound interest works exponentially, so start investing as early as you can.
Yup, there’s that awful word again. Diversify.
Diversify your investments across different asset classes and types. The easiest way to do this is to invest in index funds and ETFs.
These are broad-based, growth funds that track large market indexes (like the S&P 500) and across many, many companies. The S&P 500 has historically yielded an average annualized return of 8–10%.
Don’t invest in individual stocks, this only magnifies your risk. Yes, high risk, high reward. But try beating an 8–10% average annual return. You will be hard pressed to do so.
Consistency is King
Emotional investing is bad investing. Never try to “time” the market. Learn to invest consistently and take advantage of dollar cost averaging.
The basic principle here is that by investing consistently, you are mitigating risk and volatility. Sure, if you could time the market every single second of the day and make trades, that would be great.
There are some mastermind day traders who devote their entire days and existence to this.
If you want easy, long-term growth, don’t do this. Establish an investment schedule for yourself and commit to it. Weather volatility and reduce risk by being consistent.
Feel free to check out my website, www.lyfeblog.com