For those with limited savings… How do you start your journey in the world of long-term investment?
Millennialmoney published an article entitled “The Best Investment Strategies” by Grant Sabatier, in which he discussed his investment experience and the strategies he used to successfully manage his investments until he reached $1 million in just 5 years.
Regarding investment beginnings for beginners and entrepreneurs, Sabatier says there are many readers asking what should be done to invest if they have 1,000, 5,000 or 10,000 dollars, and all of these ideas apply to them, but it should be known first that it is not necessary to have a lot of money to start investing. You can start by investing your little surplus or if you have an extra $100 to invest, you can start today!
You can start trading stocks on a great inexpensive platform, Ally Invest, for as low as $4.95 with no account minimum. Mutual funds are priced on a per trade basis at $9.95.
I don’t invest in anything I don’t understand
According to the writer, there is a big difference between long-term investment and short-term investment. Many people do not invest in stocks because they are afraid of losing money in the short term. Which is really important, only if you need money in the short term. But if you’re investing for the long term, the writer says he doesn’t know of a better investment than stocks or, in this case, real estate.
Stocks can certainly go down, but over the long term — a 10-year period — they always rise by at least 7% per year, when gains and losses are averaged. The following is an explanation of how you can invest in the long and short term.
Long term investment strategy (10 years)
I manage 100% of my long-term investments and still follow my daily investment habits, putting money into my investment accounts every morning when I drink coffee; I don’t work with any kind of financial advisor or company,” Sabatier says. It’s actually very easy to do it yourself with a little bit of reading.
In most cases, one of the reasons people get poor investment returns is because they get emotional. This is one of the primary benefits of working with a financial advisor, as they can help you control your emotions.
In return, you can also educate yourself by reading investment books and blogs.
If you have the ability to read one book on investing, this is my favorite book, The Coffee Shop Investor: How to Build Wealth, Ignore Wall Street, and Get On with Your Life.
Once you understand how investing and opportunities work and how to reduce your risk, it helps to get rid of emotion investing.
Long term investments
Sabatier puts about 80% of his investments in local index funds, and 20% in international funds.
“The best thing about keeping money in index funds is that I don’t have to worry about them, and they are low-tax because there is less trading in them. Every dollar I invested when I started my journey to financial independence in 2010 is worth more today.” From $3.
As for 20% of his long-term investments, it is in individual stocks that he plans to run in the long term, such as Amazon, Apple, and Facebook.
I also make sure to buy; I buy, but I don’t sell stocks very often because I want to minimize my taxes, and if you invest for at least a year, this is only subject to capital gains tax.” , which is about 15-20%. Sabatier confirms that he does not day trade today or recommend that anyone day trade; This, in his opinion, is very emotional and risky. It also takes a lot of time and most people lose money during this decision. Accordingly, he finds that day trading is actually one of his biggest financial mistakes.
Investing in real estate
Sabatier explained in his article that he invests 5% in physical real estate and REITs. He plans to continue investing at least 5% of his portfolio in real estate and start exploring investing in multi-unit buildings, but finding a deal is difficult and this type of investment comes with a lot of hassle.
The more money you make, the more important diversification becomes, as long as you don’t want to put too much money into one type of investment.
Short term investment strategy (from 1-5 years)
Sabatier does not like short-term investments, saying, “I don’t have anything to save for the short term.”
However, if you want to save for a vacation, buy a house or car, or make an investment in the next 1-5 years, Sabatier doesn’t recommend that you “put 90% or more of your money in stocks like I did, it’s probably risky.” risk because stocks can go up and down dramatically over any short-term period”; And the last thing you want is for your investment to deteriorate by 20% before you find the perfect home or are ready to take that vacation.
Therefore, for short-term investing, Sabatier recommends keeping the money in a bond fund such as a total stock market index fund or a Certificate of Deposit (CD) at your local bank. These two options are definitely better than keeping your money in a savings account at 0.1% interest, where you will lose money due to inflation.
And the writer added that following this investment strategy and managing his own investments were key factors in helping him reach $1 million in 5 years. His investments have continued to grow, and he is still benefiting from doubling the funds he started investing in in 2010.