Unlock Wealth: 4 Game-Changing Investment Rules!
Many people are afraid of investing. Afraid of getting it wrong. Afraid of seeing their capital value drop.
This fear stops so many people from starting investing or taking back the control of investments they have outsourced to an advisor.
Not investing is a guaranteed way to never create wealth, so sitting afraid on the sideline is not an option.
To help you to become a great investor and get more confident so you can get your money working harder for you, I want to share the 4 rules that transformed me from a scared, clueless wannabe wealth creator into a confident, successful, action taking, savvy investor.
These 4 rules set on top of a proven and safe investing strategy ensure you get the reliable investment returns you need to create sustainable wealth and live life on your terms.
Being a successful investor is mostly about consistency and sticking with a proven investing strategy in index trackers.
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On top of this, there are a number of things you need to do to have assets working hard for you, and these are four of the most important.
WATCH THIS VIDEO WHERE I GO THROUGH THE RULES OR READ THE ARTICLE BELOW.
Simple Rule 1. Don’t try to time the market.
It might be tempting to try to “time the market”, but there's plenty of research that shows it's just not worth it to play that game.
Trying to “time the market” is trying to determine when it’s the ‘right’ time to invest.
With all the uncertainty and hype and political craziness going on, sitting on the side lines and waiting for a ‘better’ time can feel like the right thing to do.
It isn’t!
Sitting on the sideline right now is the worst thing you can do.
Since trying to time the market is such a fool's game, you may be wondering…
…"What the heck am I supposed to do?"
You want to invest like a SWAN. You invest in a way where you're sleeping well at night. You want to invest in a way that when you see a market drop, you view it as an opportunity and not something to fear.
The best way to do this is with Dollar (Pound/ Euro / Rand) cost averaging.
This is where you invest a regular amount every month in a simple portfolio of index trackers. This way, when the market goes down, you benefit by getting more units for your money.
You need to be IN the market to benefit from it, and regular investing set up on autopilot takes the guesswork and emotions out of the equation.
Simple Rule 2. Be patient.
Phil Carret was a longtime investor, right up until his death in 1998 at the age of 101. Warren Buffett called him “one of my heroes.”
In 1996, Louis Rukeyser interviewed him on TV and asked:
“What is the single most important thing that you have learned about investing over the past three quarters of a century?
Carret’s reply:
“Patience.”
Having the power of compounding working for you lies at the heart of successful investing.
And the power of compounding needs time to work. You won’t reap its rewards if you keep yanking your money out of the assets it is invested in. That’s like digging up your fruit trees before they have a chance to bear fruit and give to you abundantly over and over.
Here’s an example I like:
If you take a penny and double it every day for 30 days, you’ll have $10.7 million by the end of 30 days! Yes, that is 10 plus 6 zeros!!!!
That shows you two things.
First, it shows you the power of compounding.
Second, it also shows you that investment returns are back-end loaded.
The back-end loading I’m talking about isn’t bootylicious back-end loading. It refers to when the reward comes in at the end!
If you have $10.7 million on the 30th day, how much do you have on the 29th day? The answer is $5.35 million.
And on the 28th day? Just $2.6 million.
Think about that. Most of the money is made on the last two days.
Another reason why patience is important is that even the best investments go through periods in which they go nowhere.
Or worse they go down.
To illustrate this, imagine if a friend had introduced you to Warren Buffett in 1972 and told you how much money she made with him.
You check it out and find that Berkshire Hathaway had gone from about $8 in 1962 to $80 at the end of 1972. So, you buy the stock for $80 on December 31, 1972.
Three years later, you’d be down 53%. And to make you feel worse, the S&P 500 was only down 14%.
So, you sell in disgust. What a mistake you declare.
By December 31, 1982, the stock would rise to $775… on its way to over $324,000 today!
Investing is a game that rewards leaving it alone and getting your kicks elsewhere.
Simple Rule 3. Don’t expect to win all the time.
I love to read about the behaviours and antics of great investors. One thing I’ve learned is that no investor is great all the time.
A good example is Sir John Templeton.
He started the Templeton Growth Fund in 1954. This would be his flagship fund. The average return was about 16% per year for 38 years under his watch. This was almost four points better than the market over that time, an astonishing record. If you had put $10,000 with Templeton in 1954 and left it there, you would’ve had $1.7 million when he stepped down in 1992. That’s a 170-fold return. He did this without using debt, and often had excess cash.
And yet, his fund lost money in 10 of those 38 years—more than 25% of the time.
Investment returns in any given year mean very little. They ebb and flow in unpredictable and uneven ways.
If you chase performance, you’re apt to sell out just as they are about to turn up, and you’re also likely to buy into investments just as they are peaking.
See Simple Rule 1 - don’t try to time the market and don’t chase performance.
Simple Rule 4. Don’t diversify too much.
Most people own way too many funds and individual stocks. I’ve seen personal portfolios with 20 or 30 funds. That’s ridiculous.
With that number of funds there is massive duplication and confusion.
Adding more funds does not reduce risk.
Actually, research shows the best returns often come from concentrated portfolios.
If you are a smart and savvy investor, using index trackers to keep your costs low and your returns high, then a simple diversified spread of 3 to 5 index trackers will give you all the diversification and asset allocation spread you need.
If you just crave variety and you really must add more (just because you can’t believe it can be this simple - which it can), then cap yourself at 6.
If you stick with those 4 simple but very savvy rules, you’ll go a long way in the direction of your freedom and remember this…
The best time to start investing was when you were born,
the second-best time to start is NOW!
Let these simple rules support you and help you achieve the life you want to be living.
Big Love,
Ann
