Category Archives: Saving and Investing

If You Want to Get Rich Invest Regularly

By: GenXinvestor

invest regularlyIf you want to get rich invest regularly.  It’s really as simple as that.  When it comes to investing, success or failure depends not on what specific stock someone buys, but whether or not they develop important habits that set them up for long term success.  That’s why today’s post looks at why it’s important to invest regularly.  

Invest Regularly to Build Wealth

If you want to get rich and build wealth, then the single most important thing you can do is to start saving and investing on a regular basis.  The sooner you start, the better and remember that no matter what the market does it’s important to keep investing through the ups and downs.

When you invest regularly, you are consistently building wealth.  After a while, your wealth will continue to grow and take on a life of its own.  That’s because when we invest, 4 things work in our favor: 

1.  Pay Yourself First  

When we invest our money, it starts to work for us by earning income from interest and dividends as well as capital appreciation.

2.  Investment Income  

The money we invest starts to produce money on its own in the form of dividends and distributions.  If we re-invest this income, our investments will grow even faster.

3.  Dividend and Distribution Raises  

Periodically, companies and mutual funds will increase the amount they pay out to their investors.  This provides a nice little boost to the income that our investments produce and helps them grow a lot faster because even more money will be working in our favor.   

4.  Investments will Increase in Value  

When we invest for the long term, we can expect that our investments will increase in value.  This means that our equity or net worth will also grow.  These so-called capital gains are strictly paper profits (i.e. not real), unless the investments are sold and the profits are realized (i.e. they become real).   

Benefits of Dollar Cost Averaging

One of the benefits of investing regularly has to do with Dollar Cost Averaging. Basically, that means using small amounts of money to buy a stock or an index fund at regular intervals so that you buy some shares at a higher price and some at a lower price. The aim of this approach is to smooth out the ups and downs of the stock market so that your actual cost of the investment is somewhere between the two extremes.

Imagine that you invest a lump sum of say $12,000 in a particular stock or index fund.  Now imagine that the market crashes and your investment loses 50% of its value – Ouch!  How would you feel about that?

Now imagine that, instead of investing all $12,000 at one time, you decided to invest $1,000 a month for the entire year.  Some of the year you’re buying high and for the rest of the time, you’re buying low.  Following such an approach, in this example, would likely mean that you would have avoided a dramatic 50% drop in the value of your investment.  Maybe the investment is down only 20%.  This is precisely the benefit of investing a set amount on a regular basis.

Investing Regularly is Affordable

I think that choosing to follow an investment approach that involves investing a set amount of money on a regular basis appeals to many people because it’s an affordable way to build wealth.  I think most people would agree that it’s a lot easier to find $100/month to invest in a retirement fund than it would be to cough up $1,200 all at once.  

Many financial institutions offer their own automatic savings/investing plans for as little as $25 a month.  That’s right, for as little as $25 a month you can start building wealth and a secure financial future.  

Automatic Investing is Easy and it Works

Building long term wealth requires a commitment to save and invest on a regular basis.  The problem is that most of us simply don’t have the time or we forget to make a point of investing each and every month.

That’s why automatic investment plans are a great tool to keep us investing on a regular basis. When you take the time to set one up you’re showing a commitment to your financial future. You’ll end up paying yourself first because it will seem like just another bill coming out of the account.  Over time, you’ll begin to see this small amount grow and compound into a huge nest egg.   

Automatic investing is the big reason that I’m able to continuously build wealth.  Every week I invest $100 into index funds in my retirement account.  Each month I invest at least $100-$500, automatically into my dividend portfolio.  This money buys shares in banks, utilities, telecoms and other companies and is the main reason why I’m able to continuously grow my net worth and dividend income.

The best thing about automatic investing is that it removes emotion from investing equation. It’s no secret that we’re our own worst enemies when it comes to investing – and much of that has to do with our emotions.  When we see the stock market rise we get greedy and want to participate in it, so we buy and this pushes up share prices.  On the other hand, when the stock market falls we get scared that we’ll lose our money so we want to quickly sell.  It’s exactly this type of behavior that wrecks our chances at becoming successful investors.  That’s why I choose to make regular, automatic investments.  

So there you have it, if you want to get rich and build wealth, then invest regularly.  With a new year just around the corner, make saving and investing on a regular basis a priority for financial success in 2017.

Image Credit: Image by thanunkorn / Freedigitalphotos.net

Donald Trump will Make Investors Rich

By: GenXinvestor

Donald TrumpMake no mistake about it folks, Donald Trump will make investors rich!  Since his election victory last month, Donald Trump is unsettling virtually everything.  From shaking up foreign relations to threatening to tear up trade deals, to promising to restore the economy.  It appears that Trump is creating all kinds of chaos which I’m sure will greatly benefit the intelligent investor.

Markets are driven by emotion more than anything else and they seem to be hanging on every statement that Mr. Trump makes.  Trump promises to lower drug costs and the pharma sector falls.  He threatens to cancel the contract for a replacement Air Force One and Boeing’s (BA) stock drops a bit.  He offers vague promises of economic growth and the market rises.  First, I want to be clear that I don’t believe that  Donald Trump is some kind of Market Messiah; but his personality and temperament will undoubtedly make investors lots of money if we choose to seize the opportunity.

I for one cannot believe what’s happening in the market.  In fact, correct me if I’m wrong but I think the market euphoria we’re seeing feels like the late 90s.  This situation seems completely insane! 

Personally, I feel that Trump’s dramatic statements and theatrics are better left to the Apprentice because, in the real world, things rarely work out exactly as planned, especially when we’re dealing with things as complex as running the US Government, international relations and the global economy.

But to my mind, there’s no question that Trump’s off the cuff remarks give investors an incredible opportunity to make money.  So please take advantage of him while he lasts.  Because markets are primarily psychology driven there’s lots to work with when it comes to a Trump presidency.

I think it’s unlikely that any of Trump’s policies will make investors rich in and of themselves.  But I do think that Trump will offers us tons of money-making opportunities based on his ability to influence market sentiment.  In that regard it may be extremely profitable to be a contrarian and buy the high quality blue-chip stocks that have been hit hard.  I’m thinking about the pharma, consumer staples and utility sectors.  Stocks like JNJ, PG, UL etc.     

Major historical, economic and market forces are rarely influenced by any one person – and that includes presidents of the United States.  Everyone knows that the grandest of plans fall victim to all sorts of unforeseen events and unintended consequences and that success is often as much attributed to circumstance and luck than anything else.

So I think as investors, we need to be asking ourselves what has actually changed since Trump won the presidential race?  In the developed world, we still have an ageing population which doesn’t bode well for growth.  The EU seems to be falling apart, China still has its problems, the Russians are becoming more and more belligerent, global growth is anemic and the entire world is sitting on piles and piles of debt.

Tell me what you think.  Do you think that Trump will be good for investors?

Photo By Michael Vadon (Donald Trump) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons