Smart Thinking On Investing – June 16
Writing for The Simple Dollar, Trent Hamm heads up Smart Thinking this week with a sharp truth about our finances. Zach of the Four Pillar Freedom blog explains how investment returns aren’t the only way to be set for retirement. And Grant Sabatier, author of Millennial Money, urges us to try a powerful new mindset for retiring early.
“No One Owes You Anything”
- It is a simple truth, but one we maybe don’t consider a lot; no one else will sort your finances for you, and if you acknowledge this early, you’ll free yourself of naive expectations and regret later on in life
- No one owes you money to retire on, a good career, respect or even business success and promotions; these are earned, not granted
- You are in control of your destiny and financial future, no one else, it’s important to take control of both early if you have goals you want to achieve
How Much Do Investment Returns Matter?
- While on the surface, your eventual investment returns seem like they should be your entire focus
- A powerful savings rate can more than make up for future rough investment returns and help you reach financial independence so much quicker
- For the long run, your compound interest will help work magic on your investment returns, but short term, it’s all about getting a strong savings rate
Shift Your Mindset
- Thinking in percentages can be a powerful strategy for being part of that core 1% who are able to retire early
- Always assess the percentage difference in what potential savings and investing rates you can achieve, as just 1% extra can make a significant impact on both over a long run
- 1% extra savings/investing can take 2 years of your retirement goal and help you reach financial independence sooner, but 5% more, if you are young, can shave a whole 10 years off!
Ways to Lose Money in Investing
- Invest in companies that are going through rapid change and don’t have a competitive advantage
- Work with management teams that make money off you rather than with you or are not capable of operations and capital allocation
- Buy companies for more than they are worth and ensure they have a lot of debt—oh, and don’t forget to think short-term too
Support from the Younger Generation
- Millennials get a bad rep for a “lack of work ethic” and desire for “instant gratification”—ut there are a few areas where millennials are in fact subsidizing older generations
- The $20 trillion national debt, for instance, cannot be laid at their feet, but it is a burden that they will be paying off
- As well as being hit by higher healthcare premiums as a younger generation, millennials are also paying into the social security system which not many expect to see the benefit of in their own future
Do you want to start investing on your own, but don’t know how?
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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article. Andrew Stotz doesn’t necessarily endorse any stocks or shares mentioned in the articles or the author of such articles linked to and summarized in Smart Thinking On Investing and cannot guarantee the accuracy of its information.