I would like to talk about the importance of investing for beginners and give you some advice on how you can get started.
In particular, I would like to highlight five investment success principles. When I was 18 years old, I read a finance book called, “The Wealthy Barber”, by David Chilton.
After reading this book, I realized that the most important thing that I could do was to start investing as soon as possible.
It taught me the principles of paying yourself first and investing on a monthly basis, so that you can take advantage of what is called, “dollar-cost averaging”.
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The earlier you start investing, the sooner you can make mistakes and learn from them, and you have higher risk tolerance. My first investment was $500 in a mutual fund, with the Bank of Montreal. I started putting aside $25/month on a pre-authorized payment plan, in order to buy more shares on that fund on a monthly basis.
I was always putting money aside, but I didn’t do any active investing for many years. I did buy Facebook ($600) and Apple stock ($800), and I made some money from that, but at the time, I didn’t have a lot of money to invest. Since then, I’ve done very well with business and I’ve learned a lot about investing.
In 2013, I bought real estate property, and I make passive income from that, as well as capital growth. I’ve also got a 1.6 million dollar portfolio of stocks that consists of blue-chip stocks, index funds, dividend-paying stocks, real estate investment trusts, bonds, etc. I’ve also invested in private businesses.
I started from nothing, and I’ve been able to build myself to a millionaire, at 30 years old. I want to share with you some basic principles about investing:
#1 Pay yourself first
This is the first thing you will learn in any investment book – you need money to invest. If you cant take a percentage of what you make and put aside, you will not be able to grow your net worth. Whatever amount of money you are making right now, you need to make a decision that you will take a percentage of what you make (10% minimum).
You need to put that money in savings or in an investment account that you won’t touch. If you feel that you aren’t in a position to invest then you need to manage your finances better. Don’t ever be in a position where you are living month-to-month.
In order to pay yourself first, you either need to make more money, so that you have a positive cash flow, or you need to lower your expenses. You may need to make a sacrifice. When I was in debt, I had to eat at home, or take the bus and get rid of my car, or move in with my parents.
Look at your current lifestyle and set a budget for yourself that you won't spend more than X amount of money/month, and then the rest you pay to yourself. Make sure that you have an emergency fund of savings. Typically, what all the financial books say is that you want to have 3-6 months of savings.
For example, if your expenses every month are $2000, then you need to put aside at least $6-12,000 in savings, in case something happens to your job, to your business, etc.
#3 Invest in yourself
The #1 investment that you can make is in yourself – investing in your knowledge, developing your skills, knowledge, confidence, marketing, etc. All of the most successful people in the world understand this. If you can invest in yourself, that is what will bring you the highest return.
#4 Invest in your business
Your business has a high potential for reward because you are in control of it. The more that you improve yourself, the more that your business will succeed. Betting on yourself and investing money in a business has a higher potential for growth, and it is a lot less risky. For example, you could start an Amazon business, a publishing business, do affiliate marketing, create an app, develop software, etc.
You can explore a number of different investment avenues (stocks, real estate, loaning money, bonds, etc.). I think that index funds are a must for every portfolio. Real estate investment trusts are also good, which means that I can own a company that owns real estate, and that way I benefit from the real estate market, whether it goes up and down.
I enjoy investing in stocks, primarily index funds. Index funds have very low fees. It involves owning a segment of a market.
#5 Invest long-term
Don’t be caught up in a ‘get rich quick' mentality. You need to invest on a monthly basis. This is known as “dollar-cost averaging”. The stock market is always volatile, but if you invest every month it will even itself out. Overall, the trend is always going to go up and be better off for you.
When I invest, it will go up and down, but I enjoy it when it goes down, especially when I am investing in blue-chip companies that are secure because when things go down, I can buy more shares at a discount. The economy always recovers.
Great books to read, related to finance and investing include, “Money Mastery: The Game: 7 Simple Steps to Financial Freedom, by Tony Robbins, “Rich Dad, Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!”and “Rich Dad's CASHFLOW Quadrant: Rich Dad's Guide to Financial Freedom”, both written by Robert Kiyosaki.
Warren Buffett said it best – “I made my first investment at age eleven. I was wasting my life up until then.” Are you ready to invest in your future? It will be one of the best decisions you ever make!