Today let’s talk about the easiest and less risky strategy of becoming a millionaire through investing. There are many common myths and fallacies regarding investing – Some people were burnt by the stock while others made quite a lot in the stock market.
If you are one who have absolutely no clue about investing, then this post will help you tremendously. If you are one who wants to know the less risky way to become a millionaire, then this post will help you too.
When you are investing, you are basically buying into the shares of a company, in another words, you own a part in the company you invest.
The most risky thing about investing is that you invested in a poorly run company, invested in a overpriced company, or a fraud company.
Other than this, the reason many people lose alot money in the stock market is because they are gambling or they borrow money to invest.
By eliminating these 2 factors of investing a wrong company and gambling with the stock market, you’ll reduce your risk tremendously.
First, what you can really do is not to gamble in a way that you only invest when you have the spare cash to do so – set aside some money to invest every month. And don’t take out this money until at least 15 years later.
By doing so, you reduce the risk of daily, weekly, yearly fluatuations of the stock market.
The question that will come into your mind is what if the company go bankrupt?
Here’s the most important thing…
When you invest, go for the ETFs or so called the index funds. This means you are investing across many companies at one go and ultimately, you are diversifying your investments.
By investing for the long term and diversifying across the stock market, you are reducing the risk tremendously and most of the time, from historical statistics, you are able to make at least 8-10% returns annually.
Are you losing out on the big returns?
Afterall, Warren Buffett have been making more than 25% throughout his life. Can you do the same too? (disclaimer: figures may not be accurate)
Now, I’m going to share with you one of the best thing I’ve learnt in college – most of the best and smartest people never have a sustainable huge returns in the financial markets.
Their investments returns cannot be sustained. One year they are making 50% returns and the next year they may lose all the money.
This is essentially one of the most important lessons that I’ve learned from one of the professors who is also a hedge fund manager.
If they can’t even do that and achieved a sustainable return over the long run, then what makes you think you can do that?
It is also found out that if you invest in ETFs, the best funds would have generated the same kinds of returns because of the funds fees.
Therefore the best thing to do if you want to invest is to throw the money into ETFs and watch the money grow in the long run.
I’ll try to throw in some research and data in the future to convince you that this is the best way to invest.