Where should I invest my money

    Previously I touched on the topic where most of the people waste their money. It’s not hard to spend your money in contrast, figuring out where to invest your money is a completely different ball game. This topic is highly popular among people that just want to pull money out of your pocket, the pyramid schemes, financial advisors selling you their books. My point is, it’s not hard to invest money when you have a nice chunk of money already saved, let’s say in the range of 60k-100k. With that type of money you can already start looking around. Now for a regular Joe like me, getting to that mark is already a challenge itself.

    Invest in yourself first

    Now my blog is catered more to the younger generation, since I am not that old. The average person, straight out of high school in uni or college, is broke. Maybe you get some cash from your parents, you got a part-time job, most of your money goes for parties or goofin around. I am speaking from personal experience, there are many people out there who already save lots of their money and spend it wisely at a younger age. To those salute, you have an early start, which is amazing in the long run. Consider yourself lucky, I live in Europe, so the majority of universities are free here, which means I could get my degree with zero debt. For the majority of people around the world that is not the case.

    DO NOT GO INTO DEBT IF YOU ARE NOT SURE ABOUT YOUR DEGREE!!!

    This goes out for all the American people. When I watch Youtube videos or read about people going into 50k + debt for a degree, and at the end they don’t even graduate, it makes me want to cry. That is such a huge setback, imagine wasting 3+ years going in debt to not even graduate. It happens to many people, at 19 you have no idea if this is the degree you want to pursue. I know so many people(me included), that had no idea what to do with their life and just picked a degree for the sake of it. Now in Europe if you flunk your degree, you don’t go into debt, in America that is completely different. Which means you should think twice about picking your degree. Considering going to college for half the price is also very viable.

    After high school, your parents will push you into going straight to university or college. In my opinion, that is wrong. Go work for a few years, check out what you want to do in life, and then get a degree. You can save some money, go around the world, get to know yourself. It’s the perfect time. The older you get, the harder it is to do that. You will have responsibilities, a partner, a family, bills to pay, you won’t have the luxury to just work and see the world, do it while you are young.

    I have money that is just laying around

    So you worked a little, saved up some cash, maybe you have a side gig going that is making you some money. Sweet, where should I invest my money?

    Basic knowledge tells you, you are losing money if it’s packed in a savings account. Years ago, you could actually have money in a savings account, and you could beat inflation. Nowadays you get zero interest on your savings account, which means you are losing money in the long term. The moment I am writing this blog post, inflation rate is at a all-time high of 5% in the US. Not a good sign at all, that means the value of your money is going down 5%. You would need to get a 5% yearly increase in pay to break even.

    The basics of investing

    Investing is very simple and only requires good self-discipline, and control of your emotions. That’s all you need, you don’t need an PhD in economics, you don’t need to read 6 books on investing, it’s very simple.

    Make an emergency fund

    This is cash you have in your savings account, money for an emergency. Let’s say car accident, hospital bills, installation leak, losing your job etc. It’s basically 6 months worth of living expenses, you can calculate how big your emergency fund should be here. The biggest mistake you can make is using your emergency fund on things that are not an emergency. This is the biggest mistake I see people do. For example, you want to do a down payment on a house and need some extra money. You never use your emergency fund for that. Your car registration is done in a month, you don’t use your emergency fund for that. Those are all planned expenses, costs that you can plan for are not meant to be paid off by your emergency fund, remember that.

    Invest into ETF’s / max out your IRA

    Again, if you are from the states, your situation is a little different from the rest of the world. You get no guaranteed pension in America, you have to pay in your IRA, or you ask your employer to max it out for you. I won’t go into detail how to do that since I am not from America, so I don’t know all the details. If you are from the states, max out your IRA first and after that start investing into ETF funds.

    For everyone else around the world, the plan is following:

    Open up a online broker account -> Pick an ETF fund -> Buy shares-> Leave it alone until you retire -> Sell the stock

    That’s basically it, no science behind it. Now these questions always get asked, let me write them down:

    Q: What online broker account should I pick?

    A: Doesn’t matter, just pick a broker with good reputation. Stay away from brokers like Robinhood or brokers that only have a mobile platform. Lots of them offer their services without monthly fees, so that is a thing you can check out before deciding.

    Q: What ETF fund should I pick / how many ETF’s should I invest in ?

    A: Doesn’t matter as well, in general every S&P 500 ETF will do it. VEU, SPY, Vanguard growth funds are popular. In general buy 1-2 funds, I invest in just a single one. For example, you can buy all world ETF that covers every S&P 500 company in the world, so you are covered. Some people go technology ETF, or rest of the world ETF. So they split it like 80% into all world ETF and 20% rest of the world. It doesn’t matter, you can pick just one and be done with it.

    Q: How often should I buy?

    A: Optimal is around 3-4 months. Don’t invest monthly, it’s too much work to transfer funds to your broker account every month.

    Q: What if the stock market crashes, is it a safe investment?

    A: People are very pessimistic when it comes to the stock market, all the stories about market crashes, losing all your money when you are investing in stocks etc. Rightfully so, everything can happen. ETF funds are a special case when it comes to stocks, because they have handpicked stocks from all top 500 businesses around the world. So if a company like Apple has a bad year, and a company like Microsoft has a very good year, it all balances out. This is not a regular stock, where you put all your money in and if the company goes bankrupt you lose everything. That’s the beauty of ETF funds. Now if the stock market crashes, yes you lose all your money. But when it comes to that, you will have much bigger worries than the money you lost. The whole economy is screwed, which means your money isn’t worth anything.

    How does it work?

    You want to hold the ETF funds for as long as possible – until you retire. The average yearly return rate of a ETF fund is at 10%. In theory, that means that after let’s say 30 years, the money in your fund will be worth 300% more. Now practically you have to consider in inflation and taxes when you sell your stocks, which means your return rate will be less than 10%.

    You are your own worst enemy

    The biggest enemy while investing in ETF is you, yourself. People get caught up in news: The market will crash, huge recession, the economy is failing. That makes you scared, you go and sell your ETF stock to get back your money. This is the most common mistake people make, together with not buying ETF’s when the market is not doing well, because you are scared of losing money.

    “Time in the market beats timing the market” means you cannot time the markets and therefore would profit from buying and holding investments long term.

    This is the golden rule of investing, especially into ETF. Nothing else matters but time in the market, the longer you hold your stocks the more profit you gain – compound interest. Keep on buying when the times are good or bad and hold it until retirement, that’s all you need to do.

    Don’t get greedy

    The second most common mistake is people get greedy. People start thinking they can time the market. For example, Intel is putting out a new generation of processors next year, which means people will buy more of intel processors, the stock will grow. You buy Intel stock now and hold it for one year and sell it for a profit. It looks simple in theory, but it doesn’t work that way. Let’s say the new processors have a bug or AMD comes out with a new series to cut off Intel sales. See what I am going at?
    The market is unpredictable, if anyone could time the market there would be many billionaires around the world. Now, if you think you are the next Warren Buffet, you can try it, but be willing to lose money. For all other regular people out there, buy the ETF’s and leave other stocks alone.

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