Smart Thinking On Investing – September 15
Piggy of Bitches Get Riches heads up Smart Thinking this week examining the managed funds versus index funds battle. Author of High Fiving Dollars, Sarah Li Cain helps us master our emotions to achieve the right money mindset. And the team at Money Nuggets coaches us through getting our financial goals in order.
The Monevator Investor shares his shortcut to achieving financial freedom. And for his own blog, Peter Lazaroff asks if we should be hiring a financial advisor or doing it ourselves…
And the Winner Is…
- …Index funds/Exchange Traded Funds (or ETFs), as they allow you to invest in a cross-section of the entire market
- Managed funds are run by professionals who direct your investment money by handpicking the stocks within the funds, but they take a cut of what you earn
- As well as being more expensive and riskier, managed funds also “almost never beat the market,” so choose index funds instead where you can expect to get roughly the market return
Which side would you back in this fight? Share your comments in the section below
It’s All about Your Emotions
- If you’re not in control of your emotional state, then it’s highly unlikely you’ll ever get rich
- However much you read and educate yourself on passive incomes, etc.—and how to be successful—if you don’t believe you deserve financial independence, you’ll never achieve it
- Train your mindset to think otherwise because once you believe you can overcome debt, earn more, and reach your goals, you can and will!
Get Your Financial Priorities Straight
- Financial goals are often underestimated in their ability to help us gain control of our finances and overcome our debt situations
- Prioritize your goals by order of necessity, start with the most pressing need above other, perhaps more frivolous ones—the first of which should be your daily finances
- After this, deal with your safety needs (emergency fund) and your assets (investment and retirement vehicles) before any others
The Financial Freedom Shortcut
- Calculating how much you need with the rule of 300 can help you quickly assess how to achieve financial freedom in your lifetime
- It’s incredibly simple, take your monthly expenditure figure ( e.g., $2,000) and multiply it by 300; so the equation becomes $2,000 x 300 = 600,000
- The final amount is the figure you need to work towards before you can quit your job and still pay your bills, be aware though, it’s all based on a safe withdrawal rate of 4%
“The Difference a Financial Advisor Can Make”
- Most investors get to the point where they ask themselves if they should still be managing their money or getting a professional to do it for them
- It’s about achieving a balance about the time and commitment you want to put in and the results you want to see
- There is no replacement for professional expertise; a financial advisor can help you realize goals you would never have thought possible as well as avoid costly mistakes
Do you want to start investing on your own, but don’t know how?
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