I was recently speaking with a co-worker and telling him that I have been making a killing in stocks since I jumped into the market in the beginning of January. All he could say is that the market hasn’t hit the bottom yet. My answer was, my portfolio says differently.
I am averaging a cool 10% gain since then till now. When good value stocks have no more to lose they become under valued and that is when you must grab them up. I bought a couple ETF stocks and a couple individual stocks. The funniest thing is that I am not even buying stocks that are risky. Take some time and sit down and truly research the market and hopefully you can make a cool 25% this year with ease.
The next thing is that when the value goes up in the next 1-2 years you will be thanking me greatly.
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The Simple Dollar posted a great article that is helping a member who is young figure out if he starts early, then when can he retire. If he start at the age of 20 years old, then he can retire early basically at about 42 years old. That will only mean that he will be getting the same salary that he has right now but he will be work free but still far from retiring rich.
If you were to take 20% of your annual income starting at age 20 and put it in a S&P 500 index fund, that index fund continues to grow at the long-term historical rate (12%), and you received a 4% raise each year, you could walk away from your job and live off the interest at age 41 matching your current salary, or quit at 43 and be able to give yourself a 4% “raise” each year from the interest, which is probably the better plan because it combats inflation. Raise the amount to 25% and you’re done at age 38 and able to live in perpetuity at age 40.
All he has to do is save 20% of each pay check and then invest into an index fund like the S&P 500 index fund, I prefer to use Exchange Traded Funds (ETFs) but all the same.
The hardest part is saving that 20% or heaven help you if you can 25% per paycheck.
But like snow-flaking debt, why can’t you snowflake to a rich retirement? And of course, once you start to save and that compounded interest really kicks in, then you can be saving an extra couple thousand per year just on interest alone.
If you can save $20,000 and get 5% in interest, then you just gained an extra $1,000 for having your money sit there. That $1,000 will then help you reach another $20,000 that much quicker then before you know it, you are now getting an extra $2,000 per year.
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Men’s Health gives us four steps to retiring rich. Some of the tips (the first two) come from the author’s discussion with Mr. Warren Buffett.
Here the list:
RULE 1: Instead of trying to time the market, try to tie it. Unless you’re a top sensei yourself, don’t try to beat the market. Instead, cast the widest net possible using index funds. Buy a fund that tracks the S&P 500 or maybe even the entire U.S. stock market. If you’re able to lock in the gains of the market–roughly 10 percent a year, historically–you will have accomplished a vast amount.
RULE 2: When you’re tempted to sell, buy. When stocks are in the tank, your gut will tell you to bail, to move your money into less-volatile investments like bonds or money-market funds. It’s human nature. It’s also a huge mistake. When the market plunges–over days, months, and years–there are opportunities to make real money.
RULE 3: Collect sectors. But you have another best friend, one you don’t spend a whole lot of time thinking about: diversification. You don’t want to be thrown for a huge loss by drops in any one sector. Make sure your holdings cover the entire investment field, so if “energy” collapses, you might be protected by gains in, for example, “financial services” or “health care.” This is another great reason to invest in an S&P 500 index fund: It comprises stocks from virtually every sector.
RULE 4: Invest in yourself (involuntarily). Chances are you’re putting away money for retirement automatically; your employer takes it out of your paycheck, pretax. If you ever want to amass a lot of liquid assets–that is, money you can spend today if you want–you need to set your savings to automatic, as well.
So my Comments on each are:
- Big thumbs up here because index funds are well diversified and come with no-load fees and very low expense fees.
- This is also absolutely true because this is where stocks/shares are and will be at there cheapest so in times like this buy as much as you can and save in times of high bubble prices.
- Yet another beauty of investing in index funds.
- This way you never forget and it is all done for you.
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A house or real estate property is by far the best investment to make if you can afford to right now.
Benefits of Owning a House or Real Estate Property
- Forces you to put away money in the form of mortgage payments.
- Houses generally and mostly do not go up and down as the stock market does.
- Most of the time a house always continues to build up equity.
- If you live in the house, you get the added benefit of enjoying it as well.
- Later on you can sell it and cash in or turn it into a revenue generating cash box.
If you cannot afford one right now, you should save as much as you can on a weekly basis or a paycheck basis. Save like 20%-5% into a secret account in which you pretend to forget about then throw that money into the stock market and the bonds market.
Simply invest 40% into iShares Lehman US Aggregate Bond Fund (AGG) and put the other 60% into SPDR Trust, Series 1 (SPY).
Keep saving and compounding and you will get there.
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Being frugal should always be top on your list in order to be retire early.
Steps for early retirement
- Be very Frugal. Live below your means and don’t pay for anything that you don’t have to.
- Use coupons for everything.
- Ride a bike to your destination or car pool.
- Send your child/children to public school instead of private school. Major money saver here.
- Use credit cards with cash back rewards like Citibank, Chase and CapitalOne.
- Save at least 20% of every paycheck. After five paychecks you already have saved a whole paycheck without thinking about it. If 20% sounds like too much, then by all means start by 10% or even 5%.
- Learn how to get multiple streams of income. Get another job, start blogging, fix computers or cars in your spare time. Start somewhere and then that whole paycheck can become 100% saved.
- Invest for the long term in the stock market and always buy low. Try hassle free methods like investing in Mutual Funds and Exchange Traded Funds (ETF). These help you because you don’t need to buy individual stocks and they are well diversified.
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