16 Best investing secrets I wish I knew 10 years ago

Summary

In this video, an experienced financial consultant shares 16 essential lessons learned over two decades of investing and coaching. Key insights include building a diversified portfolio with low-fee ETFs, investing early with a focus on long-term growth, understanding tax implications in retirement, and avoiding emotional decision-making. The importance of a solid emergency fund, staying the course during market downturns, and investing in real estate as a young person are emphasized. The video also discusses avoiding 'shiny object' investments, the power of compound growth, and the value of being surrounded by like-minded individuals in your financial journey.

Takeaways

• 😀 Wealthy clients who enjoy peace of mind typically invest 80-90% in ETFs or mutual funds with low fees, and 10-20% in individual stocks.
• 😀 For retirement, tax-advantaged accounts like Roth IRAs help grow wealth tax-free and avoid the impact of Required Minimum Distributions (RMDs).
• 😀 If you can only invest $200 per month, consider adjusting your budget or finding a side hustle to increase your investment potential.
• 😀 Compounded growth is a powerful tool—long-term investment and reinvested returns can lead to significant wealth accumulation.
• 😀 Set yourself up for success by establishing an emergency fund (3-6 months of expenses) to protect your investments and stay the course.
• 😀 Boring investments, such as long-term buys of solid companies or ETFs, often outperform short-term trading and market timing.
• 😀 Avoid getting distracted by 'shiny objects'—volatile stocks may promise quick gains but can result in substantial losses.
• 😀 Market crashes are opportunities to buy quality assets at discounted prices—don't panic when the market dips.
• 😀 The stock market moves based on emotional factors and is unpredictable in the short term. Focus on long-term investments (5+ years).
• 😀 If you're under 30, buying a house is a game-changer. It can build equity while also offering an opportunity to invest in the stock market.

Q & A

What is the recommended way to set up an investment portfolio for long-term success?

The best approach is to allocate 80-90% in ETFs or mutual funds with low fees, with a strong preference for a three-fund portfolio. You should choose solid ETFs with a history of stability. For more conservative investors, adding 10-20% in individual stocks and potentially a portion for bonds can help manage risk.

What are the key tax-related considerations when approaching retirement investing?

It's important to invest in tax-advantaged accounts like a Roth IRA, where your contributions are taxed upfront but any growth is tax-free after age 59½. Also, be aware of Required Minimum Distributions (RMDs) that are mandated from accounts like traditional IRAs starting at age 73, which could force you into higher tax brackets.

What should I do if I can only invest a small amount, like $200 per month?

If you're only able to invest a small amount, the key is to look at your spending and see where you can cut costs. If cutting isn't possible, then look for ways to increase your income, such as finding a higher-paying job or adding a side hustle. Even small monthly investments can compound significantly over time.

How does compound growth work in investments?

Compound growth allows your money to grow at an accelerating rate over time. As you earn returns on your investments, those returns themselves start generating more returns, leading to faster and bigger growth the longer you stay invested.

Why is having an emergency fund essential for investing?

An emergency fund ensures that you won't have to pull money from your investments in case of a financial emergency. This allows you to stay invested in the market and benefit from compounded growth without being forced to liquidate your investments prematurely.

What is the importance of investing in boring, stable investments?

Stable, less exciting investments, such as solid ETFs, are the real winners in the market. Trying to chase fast gains with volatile stocks or short-term trading often leads to greater risks and disappointment. Slow, steady, and boring investing is usually the most successful in the long run.

Why shouldn't I invest in flashy, high-risk stocks?

Investing in high-risk stocks that can spike rapidly might give you a short-term thrill, but they can just as easily plummet. The volatility and emotional stress are harmful to your long-term financial health. Stick to solid investments and avoid the temptation to chase quick gains.

What should I do during market crashes?

During market dips, instead of panicking, you should view them as buying opportunities. If you're investing for the long-term, you can purchase high-quality assets at discounted prices, which could yield greater returns once the market rebounds.

Why is it difficult to predict the stock market, and how should I approach investing?

The stock market is influenced more by emotional reactions and external events than rational decisions. Predicting when to buy or sell is extremely challenging. As a long-term investor, it's best to focus on the overall trend of the market and the fundamentals of companies, rather than getting caught up in short-term fluctuations.

What advice do you have for people under 30 regarding investing and buying property?

For younger people, buying a house is a powerful strategy. Instead of renting or dorming, consider purchasing a home and renting out rooms. This way, the rent you collect from roommates could cover your mortgage, and the house will appreciate over time, contributing to your wealth.

What is the greatest risk when it comes to investing?

The greatest risk in investing is not investing at all. Holding your money in cash due to fear of the stock market leads to losing money to inflation over time. To build wealth, you must invest your money, as keeping it in cash will erode its value.

How can I get started investing with small amounts of money?

Start small, even if it’s just $50 a month. The key is consistency and allowing compound growth to work over time. Automate your investments so that a percentage of your income is regularly invested, which will lead to greater wealth in the long run.

How important is your social circle when it comes to financial growth?

Your social circle plays a huge role in your financial success. Surround yourself with people who value saving, investing, and personal growth. Being part of a community that shares similar goals can help you stay motivated and focused on your financial journey.

What should I do if I find myself getting emotional about market changes?

It's crucial to stay calm and focused on your long-term goals, especially when media or market volatility causes emotional reactions. If you’re part of a strong community of investors, their balanced perspective can help you stay on track, even when others around you are panicking.

Why should I avoid waiting for the 'perfect' investment opportunity?

Waiting for the perfect stock or portfolio is counterproductive. The most important thing is to invest regularly and allow time in the market to work for you. Trying to find the perfect investment can cause delays, and missing out on growth in the meantime could harm your long-term success.