Let’s be honest; investing seems exciting when you hear about it. Then when you start doing it, it is quite boring! This is one of the few times boring is good. But investing is a great tool to build wealth passively. Just like being a parent, investing will teach you how to be patient. Some days you will be tempted to scream or throw in the towers, but you won’t because you know there is a greater cause you are fighting for.
Who is investing?
What do you think about when someone says that they invest in the stock market? Do you think they are very sophisticated and smart? Do you think it is reserve to the elite, the 1%? Do you think it’s for the rich and privileged?
What if I told you that it’s none of those! You don’t need to be rich to invest, but you need to invest to build wealth. There is nothing complicated about it (at least don’t make it complicated) if you apply the basic principle: buy & hold, don’t try to time the market, and pick index funds.
Let your investment grow!
If you are anything like me, you might want your investing journey to be more exciting and engaging; but it’s nothing like that. You feel like you should be doing more. I’ve realized that the key to successful investing is to let the money do the work for you by leaving it alone. The hard part is staying patient. Don’t touch your investment out of panic or mood swings. Your investment will make you wealthy only if you let it grow.
Here is where the “boring” part comes in. Just sit down and watch the magic happen. The market will do what it does, but it also doesn’t need your help to grow your money.
Resist the Urge!
I have to stop myself every time I think about “jazzing up” my investment. I thought about adding individual stocks or crowd investing in real estate (Fundrise). It’s not because my current investments are not performing; it’s just that I want to do more, make it “exciting”.
But nothing bit the good old index funds (non-managed mutual funds – the easiest way to tell is by looking at the funds’ expense ratio between 0.02% – 0.2%.). My top 3 favorite equity funds are a) Total stock market, b) US stock market, and c) S&P 500. You might want to add bonds to balance your portfolio. I have a high tolerance to risk, so I don’t mind having almost everything in stock.
Lump-sum vs. dollar-cost averaging
So, how do you invest? You need to do is invest regularly and use lump-sum investing when you can (this is a personal choice; you can also use the dollar-cost averaging method if you prefer). If you have the money up front, why not investing early to have more time to grow?
Vanguard has done a study that shows lump-sum investing results in better/higher returns. Don’t be afraid of the volatility of the market. The roller-coaster will keep going, and as long as you don’t get off, there is always an upward swing to come.
Conclusion
So how long does investing take, and how complicated is it? If people knew that it takes four clicks (less than a minute) every month, they won’t be impressed or intimidated. There might not be anything special about this, but it’s so worth it. My journey to financial freedom depends on my ability to build wealth. And my ability to build wealth is solely based on my investing. It’s not rocket science; the math works all the time. The only way it won’t work is if we mess-up.
“The big money is not in the buying or selling, but in the waiting” Charlie Munger
