Does investing seem overwhelming? Do you think it’s hard investing in market stock? Is there a way to simplify investing?
Don’t give up! Fortunately for you and me, investing is a lot easier than what we think. There are steps you can take to automate the process, as well as to find investments that will allow you to sleep soundly no matter what the market is doing.
Why investing seem so complicate then?
Because there is an entire industry out there profiting from the chaos. Banks, financial advisors and other people working in the financial industry want you to believe that investing is hard, only accessible to professional. And the reason is simple; PROFIT. They make a lot of money from uneducated investors.
Also, the media add to the din, with advice on building a sound long-term portfolio conflicting with articles on the 10 hot stocks to buy now. And again, it’s all about; PROFIT.
The result is that over time, investors find their portfolios become increasingly complicated and cluttered. Multiple accounts without reason, few investments here and there not fitting your investment plan or maybe even few financial advisors (more brains, better results, right?)
I get it.
I spent years feeling overwhelmed and frustrated with investing, it seems everyone else had all figured it out. I felt like running around with a black box over my head, without direction.
Whether you’re just getting started as an investor or being engaged in the markets for decades, I’m going to show you in simple steps how to make investing much easier while being more profitable.
Finally putting a stop to that voice in your head screaming; “How can I simplify investing?”
Step 1: Reorganize Your Accounts
If you’re like most people, you have got multiple brokerage accounts, a retirement plan, mutual funds, insurance and more.
A bundle of accounts is not only hard to monitor, but you don’t get a grasp of your financial affairs which jeopardize your decision process to achieve your goals.
I’m guilty of this for several years, till I asked myself: “How can I simplify this mess?”. It was much easier than what I thought.
Reorganizing my accounts is one of the most efficient and time-saving moves in my financial life. Not only I don’t have to deal anymore with multiple companies and multiple fees, but I could focus on my portfolio strategy gaining better returns.
Yes, my friend, you need to focus if you want GREAT investment results.
As you review your accounts to see what you can consolidate, try to view your investments as a single portfolio. Each account, whether it is a tax-deferred account or a taxable account, can have a very specific objective and type of investment. One account may be mostly fixed income and another might be more trading orientated, while yet another is just for global investing.
Step 2: Go On Autopilot
I believe in automation; it just makes life much easier.
When comes to investing, it also saves you from doing silly things with your investments. I’ll explain this in the next step.
Once you reorganized your accounts and developed an investment strategy, arrange automatic periodic transfers from your bank account to the investment account.
Investing periodically is the key to growing your wealth.
Step 3: Consider Indexing – ETFs
I love ETFs, they are simple, efficient and cost effective. If you’re new here, ETFs are vehicles mirroring an index providing diversification at low cost. If you aren’t a millionaire that can afford to buy shares of multiple companies to diversify their portfolio, ETFs are perfect for you.
For example, if you want to invest in gold, just buy a gold’s ETF which has diversify assets forward the yellow metal. I recently wrote my recommendation for the best ETFs in 2017, it might help you to get started.
Investing can be complicated if you want to pursue it as a full-time Gig. You have to keep looking for bargains, analyzing hundreds of stocks every month and deciding which ones to buy and when to buy and, later, sell them.
A great way to avoid this process while still enjoying solid investing results is to be an index investor. According to John C. Bogle, with a simple indexing strategy, you can beat professional fund manager.
If you would like to learn more, read his best-selling book; Common Sense To Investing. One of the best book I ever read about personal finance.
As you can see above, by simply investing in the Vanguard S&P 500 Index Fund which mirrors the S&P 500 index, you can expect in average a 8% per year. Simple enough?
Step 4: Buy Undervalue Sectors
This is the pillar of my successful investing strategy which brings me double digits return every year. This is why I could retire at the age of 31 from the corporate world. Thanks, dear market 🙂
I look for undervalue sectors. The markets are cyclical, meaning that at any point in time, a sector might be undervalued or overvalue.
The benefit in spotting undervalue sectors is that you can buy shares of the best companies within a bitten up sector for pennies on the dollar.
It’s like purchasing a house during a recession when foreclosure is at its highest. Everyone is selling, prices collapse and you get the deal. Sell the house a few years later for a good profit. Enjoy the ride.
For example, this year (2017), the Uranium sector is undervalued. In fact, I’m buying the best Uranium mining companies out there at a discount price. Sound risky? Much less than buying any company in the S&P 500 which is at its highest of all time.
Justin from Next Big Trade wrote an excellent article about this process to discover sectors which are undervalued and ready to take off. Justing knows what is talking about, and I have a great respect for his work.
Step 5: Don’t hire a financial advisor
Look, I don’t say that financial advisors are bad people, on the contrary, some are excellent. However, you have a small chance to find a killer of a financial advisor, but if you do, let me know.
In the meantime, it’s best you get educated about investing and how to live a rich life by following SmartMoneyToday.
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Step 6: Rebalance Your Portfolio
Don’t chase investments, be discipline, patience and the market will do wonders for you.
Once you have established your desired asset allocation, it’s a relatively simple matter to rebalance between one and four times a year.
When an asset class has increased enough that it takes up too large a portion of your portfolio, you can sell high and buy more in another asset class where the prices are lower.
By doing so, you move assets from overvaluing to undervalue sectors. It’s a practical system that increases your margins of return.
Why Nobody’s Giving Those Tips?
Because nobody makes money off it.
Imagine your financial advisor teaching you these tips. What would happen? You would fire him and his expensive managed funds. Bloomberg would be a dead channel. And the financial newspaper and magazine couldn’t sell issues with headlines like 10 Hot Stocks to Buy Today!
But for me, I’m happy to share my knowledge and see you succeed in life.
So, the bottom line is simplified your portfolio with the above tips and you should see improved overall performances.
After all, with a simpler, less complicated portfolio, you will be able to focus your efforts on improving its performance, rather than trying to sort out how it works.
As always, leave a comment if you have a question. And if you feel that your finances are a mess, I’d love to hear your experience. 🙂