As you master money management, expenses suppression and begin to increase your income, you will start to accumulate cash and savings. This is good. This is the cornerstone of your strategy. As the cash accumulates, you’ll need to begin to look where to deploy your new found capital. It’s time to look into investing.
Investment Income
The key to financial freedom is to have consistent, passive income from secure sources so that regular employment is no long necessary. Your investments are an important component of this picture. If you have no experience investing or trading stocks on your own, it’s time to start the learning process.
Learning how to invest definitely takes time. In fact, I believe that it takes several years of active investing for you to understand the stock market; therefore, the sooner you start the better.
As you build up your investments, you will be able to reinvest your returns since you will not be relying on the investment income. The compounding return will help you build a nice portfolio over time.
Learn How To Invest
You need to learn how to invest on your own. Forget high priced mutual funds or advisers that take a percentage of your money for mediocre returns. Here are a few tips to get started as an active investor:
- Stick with Exchange Traded Funds (ETFs) in the beginning. They are typically “baskets” of companies so you are not at risk of a single company imploding. Avoid the leveraged ETFs, however.
- Don’t buy entire positions at once. Accumulate positions over time so that you don’t buy every share you own at a single, overinflated price.
- Just follow the market. You’ll be surprised what you’ll learn just by following the day-to-day movements
- When getting started with individual companies, start with a company that you already know well. A few examples: Apple (AAPL), Macy’s (M), Exxon Mobil (XOM), Philip Morris Int’l (PM), Coca-Cola (KO).
- Find an “expert” you like and follow his lead. Make sure you examine their track record thoroughly; especially look at their performance during a down year in the stock market.
Over time, you will develop a strategy and hopefully generate consistent returns. Don’t go for a home run, but go for consistent, above average returns.
Jump To Another Step In This Guide:
- Step 1 – Assess Your Situation & Set Some Goals
- Step 2 – Get Out Of Debt
- Step 3 – Smart Money Management
- Step 4 – Boost and Diversify Your Income
- Step 5 – Reduce Housing Expenses
- Step 6 – Make Your Money Work For You
- Step 7 – Protect Against Inflation
- Step 8 – Invest In Cash Flowing Assets
- Step 9 – Pursue Complete Independence
- Step 10 – Make Incremental Improvements
