Most people think in order to be rich you need to work 90 hours a week and be a genius - like Elon Musk. But there is an easier way. Instead of working 90 hours a week, you need to invest over a long-time horizon. Instead of being genius, you need to be disciplined.
This is how it works. What happens when you spend less than you earn? You have extra cash. What do most people do with their extra cash? They buy stupid stuff – like another pair of jeans, or a fancy pair of sneakers. Rich people do something different. Because they do not want to have to work for money their entire lives, they INVEST this extra every month, and they start doing this from a very young age (normally in their 20s).
So where do they invest their surplus cash? There are many places to invest, for example real estate and their own businesses. These are great places to invest, but they normally require large lump sum investments. There is an easier way to start investing today that in assets that meet the following requirements:
1) they accommodate small monthly contributions
2) they provide easy liquidity – your investment can be liquidated quickly and without penalty
3) they are transparent – you have pretty good idea as to how they generate revenue
4) they have a long track record of delivering inflation beating returns
I am talking about the stock market. The stock market has produced more millionaires than any other market. The stock market is a marvelous place where you can invest in great companies like Amazon, Tesla, Microsoft, Apple and Coca Cola. It is accessible to anyone who has a bank account. It is easy to create a debit order off your bank account to commit to a monthly investment into the stock market. Secondly, most stocks are liquid. Thirdly, listed companies need to disclose their financial information every quarter so there is fantastic transparency, and finally, the stock market is an inflation beater. Over the past 30 years, the Standard and Poor’s 500 Index has delivered compounded returns of approximately 10 percent. These are fantastic returns, especially considering they include three major stock market crashes – the dot.com bubble bursting in 1999/2000, the collapse of Lehman Brothers and the Great Recession of 2008, and the Coronavirus pandemic of 2020/2021.
So, what is the plan?
Step 1: Start Young Most people take approximately 30 years to get rich and financially free. If you want to get there by the age of 50, you need to start investing at the age of 20. The longer it takes for you to get into a disciplined investing routine, the older you will be when you reach the goal.
Step 2: Relax
The stock market brings out the worst in us because we believe it will get us rich quick. Most people are terrified of the stock market because it exhibits wild and volatile swings and this is true – in the short term. The stock market, over the longer term, tends to be more predictable and benign. Your first step is to recalibrate your opinion of the stock market and take a long-term view. You need to be patient and you need to be religiously disciplined in your investment.
Step 3: Monthly Contributions – Annual Consultations
Every month, you need to commit to investing a minimum amount of cash into the stock market and you are only allowed to check your account statement once per year.
Step 4: Choose a Low-Cost ETF that You Like
ETFs are powerful financial tools. An ETF is a single share listed on a stock market that replicates the performance of a basket or index of shares. For example, QQQ is an ETF that tracks the NASDAQ 100 index - this index invests in 100 of the most important tech companies in the world – for example Apple, Microsoft, Amazon, Tesla, Google and Facebook. There are also ETFs on specific country indexes (like South Africa, Brazil, Russia and China), specific sectors (financial services, biotechnology, energy) and themes (growth, high dividends, value companies). You want to invest in an ETF where you are positive about the future of the underlying companies. For example, if you believe that fossil fuels will become less important than renewable energy in the future, you may not want invest in an ETF with lots of oil companies. You also want to choose a low-cost ETF. Many people do not have a good understanding of the impact of fees. Let’s say you invest in a fund that charges a 2% annual fee. That does not sound like much, but if the fund delivers a return of 10%, you are paying 20% of your returns (2% divided by 10%) in fees. A low-cost ETF will charge more or less 0.25%.
Step 5: At Least $100 (or your local currency equivalent) a Month
All you need to do is invest $100 per month. To understand how extremely attainable $100 per month is, I did a quick Google search on what $100 can buy you these days: Eight or ten movie tickets, 10 months of Netflix, four or five new movies on DVD, fifteen used DVDs at a yard sale, lunch for four at a fairly nice restaurant, 40 cheap burgers or 90 candy bars.
So how much would your 30-year religious investment in this broad-based US stock index yield? The answer is $226,048. That is inordinately better than investing in a savings account or Treasury bonds. How much would you need to invest every month to be a millionaire in 30 years, 20 years, 10 years and 5 years?
Assuming the same total returns of the Standard and Poor’s 500 index of 10% as we have seen over the past 30 years, here are the monthly investments that will yield $1 million after the stipulated period
30 years: $442
20 years: $1,316
10 years: $4,881
5 years: $12,913
That’s not bad going.
#lifecoach #motivation #lifecoaching #coaching #love #mindset #coach #inspiration #selflove #life #success #selfcare #lifestyle #mentalhealth #mindfulness #personaldevelopment #entrepreneur #goals #happiness #meditation #loveyourself #healing #motivationalquotes #lifequotes #positivevibes #fitness #businesscoach #motivationalspeaker #business