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Breaking Through the Mystery of Investing

January 30, 2015

Investing

In this episode, your Money Guys are breaking through the mystery of investing so you can start putting your money to work for you. Why? It’s the fastest way to grow your wealth.

Brian and Bo hate to see so many individuals out there put off by the idea of investing, so they’ve decided to show listeners how easy it is to get started with investing, and explain why you should.

If the idea of investing intimidates you or you get anxiety thinking about putting your money into the market, you need to listen to Brian and Bo’s advice on traditional investing. It could mean the difference between having a five-figure portfolio or six-figure portfolio in retirement.

5 Tips You Need to Know About Investing

Brian breaks down the simple facts of investing in 5 tips:

  • The Fix Is In: Brian explains that if you invest in the market for just one year, you have a 75-80% chance of making money.
  • Be Patient: If you invest in the market for 7-8 years, you’re almost guaranteed to make money. Investing for the long-term drives up your potential for success.
  • Have a Reasonable Expectation: Brian reminds us that no one has a crystal ball when it comes to forecasting the markets. It’s important to have realistic expectations and not buy into hype. Investors need to realize there’s no “best” time to get into the markets, and that you shouldn’t be so scared of investing that you don’t take action.
  • Don’t Swing for the Fences (All the Time): The worst thing you can do as an investor is be over-confident of your risk tolerance. When the market is performing well, it’s easy to think we should invest more, but it’s important to have some liquidity. Keep the future in mind as well: just because life is good now doesn’t mean it will be in 5 years.
  • Understanding Your Emotions: Brian goes through the range of emotions investors often feel throughout the market cycle: from being overly optimistic, to being fearful and desperate. It’s crucial to understand your emotions in relation to the market to recognize opportunity.

Brian also mentions how powerful investing can be when you compare your net worth with your earned income. If your net worth has gone up more than your earned income, that means the value of your assets is appreciating quickly, and you’re on the right track to financial independence.

Basic Investment Terms to Know

Brian and Bo quickly go through some basic investment terms you should know before putting any money into the market.

  • Cash and Equivalents: Checking accounts, savings accounts, CDs, money market accounts – anything FDIC insured that won’t lose value and is secure.
  • Bonds: A loan you make to another entity, corporation, or government. Essentially, you’re letting this entity pay you for the use of your money, and in turn, they’ll pay you interest.
  • Stocks: This is when you buy equity into a company, which means you have ownership in the future profitability of that company.
  • Mutual Funds: Offered by an investment company, these invest in a basket of stocks, bonds, and/or cash. Instead of buying individual stocks, you can invest in a mutual fund that owns shares in many different companies.
  • Exchange-Traded Funds: Similar to mutual funds, ETFs give you a wide exposure to a number of different holdings. These trade like stocks and are more tax efficient than mutual funds.

Lastly, Brian advises that people should also consider tax and risk diversification — you don’t need to invest all of your money wildly. Invest the right way with these simple tips, and you’ll be well on your way to financial independence.

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