It is an interesting fact to know that the subject of how to get rich has been searched over a million times since the birth of the internet. Whatever is the reason behind the search either for lifestyle, freedom, travels the world or to keep scores.
The statistics only reveal one major thing which is, people don’t want to be poor, they are always on the lookout for a way to grow their cash flow base and live a financially stress-free life for retirement purposes or the freedom that comes with having money.
There are ways to make money, among which is starting a business, selling skill sets, or investing. Investing could also be investing in an existing business, investing in stocks, options, bonds, investing in landed properties, or real estate as well as buying portfolios. Investment has been a key path to growing your cash flow exponentially.
Thus the purpose of this article, 10 Investing Tips for 2022 That Only the Rich Knows written to provide you with tips and secrets used by the rich to grow their cash flow in 2022 and how you too can. For clarity, let’s take a look at the concept of “investing”.
What Is Investing
Investing in a simple term is a means by which one grows his or her cash flow system in order to bring more meat to the table. It’s actually an act of multiplying one capital source in order to maximize profit at a given time frame or end goal. It can be referred to as buying an asset that increases in value over time to make a profit.
An investment is an asset or item acquired with the goal of generating income or appreciation. Appreciation refers to an increase in the value of an asset over time. When an individual purchase a good as an investment, the intent is not to consume the good but rather to use it in the future to create wealth.
According to Wikipedia, Investments is the dedication of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing is to generate a return from the invested asset.
The Importance and the Advantages of Investing
- Beat inflation
with a good and proper investment plan, you can beat inflation. If you don’t invest your money but just leave it in your checking or savings account, the money will decline in purchasing power as inflation will eat away the value of your money. While the reported inflation is quite low nowadays, the actual inflation is quite high as education and healthcare expenses are increasing much faster than reported inflation. Canadian banks are not even paying 2% on your savings deposit which means that if you do not invest, your money will lose value over time.
Even this 2% return may not sustain for long as other foreign central banks have cut close to 0% or even lower. This means that you could face a day when your bank deposits earn 0% return or even negative returns sometime in the future when inflation is taken into account.
- Investing is one of the key ways to achieving the financial goals you desire. As an individual grows through life, there are new financial requirements that come up.
It usually starts with buying a house. Even if one funds a house through a loan, there is the requirement of a substantial down payment. By investing through a mix of assets, an individual can build up the corpus required for the down payment.
Another major investment goal can be the college education of children. With the steep college tuition required these days, a parent can start investing in college tuition even when the children are still very young. Besides these financial goals, retirement is always an omnipresent financial goal for people during their working lives.
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- Retirement plan
The majority of people invest for retirement purposes. As most people rely on their salary income for meeting their needs, it becomes difficult to sustain their lifestyles after retirement and they are out of a job. This means that everyone needs to invest a part of his income during working years to ensure a nest egg during his retirement years. While the government and companies used to give a defined benefit pension plan for employees earlier, no one has to mostly rely on defined contribution plans.
A lot of young people also want to retire early so they need to invest a larger portion of their income in order to meet their goals. Saving a major proportion of income from a young age (as high as 70% of your income) can allow one to retire at the age of 40-45 years, instead of 60-65 years.
- High (ROI) return of investment.
Investing funds in an asset involves a tradeoff as the investor foregoes the utility of using the funds for his investment in the present for some higher utility in the future.
- Investment in stock can lead to returns in two ways – one could be through dividends while the other could be from capital gains.
- Investing in a bond can benefit the investor in the form of regular payouts or coupons which are given during predetermined time periods.
- Investing in real estate can also benefit an investor through rental income and capital gains.
Having dissected the concept of investing as well as its importance, let’s take a look at 10 Investing Tips for 2022 That Only the Rich Knows – and how you can use these tips as well.
The 10 Investment Tips for 2022 That Only the Rich Knows
- Debt burden yet invest some
- Start with low-cost index funds
- Minimize your investment fees
- Invest in the stock market no matter the volatility in the market
- Take some risks
- Let a robot make some of your investment decisions
- Never invest your emergency fund
- Reassess
- Invest and not speculate
- Be tax efficient from the very beginning
DEBT BURDEN YET INVEST SOME
Most people can only invest when they have enough money. You don’t have to be like most people and wait until you’re out of debt to start investing. The truth is while in debt, sometimes it does make sense to focus on paying off debt first.
While you are been paid, you can contribute a portion of what you earn to an investment plan while having your company pay off your debt, by so doing you’re accruing more debts. It’s a good way unless doing so would put you deeper in debt, but it’s advisable you check yourself before embarking on any loan or debt in order to lessen the tensions.
Paying off your high-interest debt. Any debt that’s costing you above 6% to 8% for a year in interest gets priority before you invest further.
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START WITH LOW-COST INDEX FUNDS
When starting your investment journey, you’re been presented with a lot of choices to make which include both high and low investment choices. The best place to start is with low-cost index funds like the S&P 500 index funds which happen to be Warren Buffett’s favorite choice for most investors.
Investing in this gives you a leveraging power to become an investor in 500 of the biggest companies in the U.S., like Apple, Amazon, and Johnson & Johnson. With a single purchase, you’ll get a diversified portfolio. Another great way, and thanks to the birth of cryptocurrencies, you can buy a certain fraction of the cryptocurrency portfolio for as low as $1 and consistently over a period of time grow into substantial profits, which gives you 10 times your investment.
MINIMIZE YOUR INVESTMENT FEES
There are certain investments that accrue high fees during transactions and others are minimal. Look for funds with an expense ratio below 0.1%. That means less than $1 of every $1,000 goes toward fees. A few good S&P 500 funds meet this criterion in no particular order. Example SPDR S&P 500 ETF Trust (SPY), S&P 500 Index Fund (SWPPX), iShares Core 500 ETF (IVV), Fidelity 500 Index Fund (FXAIX), and Vanguard S&P 500 ETF (VOO).
INVEST IN THE STOCK MARKET NO MATTER THE VOLATILITY IN THE MARKET
This is simply an act of setting aside a certain amount of money to be invested in a particular stock either on a weekly or monthly basis, depending on your budget. The most successful investors practice dollar-cost averaging, which means you invest on a regular schedule whether the stock market is up or down. Your money will buy less when the market is up, but you reduce your investment costs over time because you’re locking in some low prices as well.
For example: at the end of every month when you receive a paycheck, you put aside, let’s say $10 or $20 for an SP 500 stock. At the end of 12 calendar months, you would have invested about $120 to $240 and with the stock increase over the stipulated time frame, you would have made more than 10 times your investment.
TAKE SOME RISKS
This does not necessarily mean investing all your live savings probably because you saw a good potential investment opportunity that is capable of bringing 10 times your investment. This is not advisable because even the stock or whatever you’re investing in is good and the tendency of going into extinction is low, it will still take some time to grow before you can harness its profits.
For example: in the crypto space, one of the coins at the time of writing this report, that investors are talking about as well as investing big time into it because of its low price and its potential growth in the nearest future is Shiba Inu. Although the coin will pay off investors and they will make 10 times their investment, the crypto market is very volatile and you shouldn’t invest all you have. A few bucks are okay but not all. So is the popular saying when it comes to investing “invest what you can afford to lose”.
When you’re a beginning investor, it’s important to invest in stocks mostly — and that involves short-term risk. Fortunately, the stock market has a proven track record of recovering over time. As you get closer to retirement, you’ll reduce your risk by investing in bonds more and in stocks less.
Read Also: 7 BEST CRYPTO APPS FOR BEGINNERS
LET A ROBOT MAKE SOME OF YOUR INVESTMENT DECISIONS
Sometimes when it comes to making an investment decision, the task is almost difficult. Figuring out the right mix of stocks versus bonds based on your age and risk tolerance can be tricky, even for an investment pro. So more reasons why you should outsource the task to the robots that have been programmed to carry out such a task.
If you have a Roth or traditional IRA or a taxable brokerage account, you can often use a Robo adviser to automatically allocate your investments. Don’t worry. They usually deliver superior results compared to their human counterparts, and they’re a lot cheaper. Though Robo-advisers are unusual for 401(k)s, you can accomplish automatic investing by choosing target-date funds.
NEVER INVEST YOUR EMERGENCY FUND
The beginning of 2020, has been full of uncertainties. If 2020 taught us anything, it’s the importance of having an emergency fund that could cover you for at least three to six months. This money does not belong in the stock market.
Keep it in a savings account, money market account, or certificate of deposit (CD). The downside, of course, is that interest rates are minuscule. But because these are FDIC-insured accounts, you know your money will be there no matter what. The world can’t get enough of risky stock trading moves, like the GameStop and AMC short squeezes. Short-term trading is basically gambling. You’re betting on the daily whims of the market. This helps you stay protected against rainy days and avoid pulling out all your currencies because you are in need. To avoid this, have a separate account for investing and savings as well.
REASSESS
Once you start investing, remember it’s a continuous process so you need to periodically review your investments, personal circumstances, timeframes, and risk tolerances, as all of these will change over the course of time. For example, as you get closer to your goal you may want to reduce your exposure to riskier investments to try and secure your capital. In addition to assessing your own personal risk tolerance, check your portfolio’s risk profile. As different top investments funds change in value it will adjust their weighting in your portfolio and this will affect the overall risk profile of your portfolio. Periodic rebalancing of your portfolio seeks to readjust this back to the desired level.
INVEST AND NOT SPECULATE.
Investing is about leaving your money to grow for five to 10 years or longer. If you want to risk money on day trading, go ahead. But treat it like slot machine money. Only invest what you’re willing to lose.
One of the most influential investors of history, Warren Buffet said “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”. Though penny shares with their perceived potential for high returns through “cancer cures” or “prospective oil field” can be very enticing, you need to consider what the long-term future value of the company is. Very small companies can be riskier purely due to the fact they may be less well regulated than the larger, multinational corporations. It’s false to think that taking an increased risk guarantees you more money, you wouldn’t bet on a pony in a horse race.
BE TAX EFFICIENT FROM THE VERY BEGINNING
When it comes to investing, you will likely start off with a relatively small pot and might think tax efficiency is not a major concern. Remember, investing is a long-term strategy and you need to consider the potential value of your investments in the future. Consider you’re investing now for your retirement, by the time you reach retirement age you may have acquired a considerable pot. If you haven’t invested in a tax-efficient environment like a pension then you may end up paying a considerable amount of tax. Ensure you are aware of this when you open an account.
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Summary
To grow wealth, you need cash flow coming in from the three types of income which are business income, portfolio income, and passive income. Two out of these income types require your active efforts and the other one which is passive income is an almost seamless and painless way to grow your wealth exponentially. To make money this way, with almost a painless effort, you must invest some fraction of your money to grow and most importantly while you sleep.
The research above is aimed at exposing some investing secrets only known by the rich to make them richer. If you want to become rich, promptly follow these tips.
