How to Invest My Money for Predictable Returns

How to invest my money for predictable returns?

In one of our earlier articles, we shared how you can develop sound money management habits using T. Harv Eker’s 6-Jar Concept. Once you start to have a small amount of money in your Financial Freedom (FF) jar, you’re ready to start investing those resources. What investment choices should I go for? What investment strategy should I follow? Obviously, getting a good investment advisor will help. But if you prefer a more DIY approach, then consider the tips by Charles Wheelan in his book Naked Economics: Undressing the Dismal Science, where he shares a range of economic and financial principles that explain how the world and markets operate.

T. Harv Eker’s 6-Jar Concept

THE SURE-WIN INVESTMENT STRATEGY

If you are looking to amass a large amount of wealth, there IS a solution. Unfortunately, this strategy involves old-fashioned financial wisdom, and requires you to make consistent short-term sacrifices, for the slow and steady accumulation of wealth over time.

The great news is, if you are prepared to follow them, these 4 investment principles help you to get predictable returns on your investment after a set period of time.

1. Save. Invest. Repeat.

Capital is scarce, so the market will pay for it. Start by clearing your debts and saving so you have spare capital. You can then build an emergency fund using high-yield savings accounts to ensure you have a safety net. This allows you to take advantage of your saved capital without risking your financial stability. After securing an emergency fund, allocate a portion of your savings towards your initial investment in various financial tools like mutual funds or exchange-traded funds (ETFs).

2. Take Risk, earn Rewards

Once you have spare capital to rent, you can choose your financial tools. Generally, the riskier the investment, the higher the rewards. Choose risky investments only if you have the tolerance for the risk.

One of the interesting (and sadly true) observations made by Wheelan is how, when it comes to losing weight and getting rich quickly, some of the smartest people will believe the most ludicrous solutions. If you see an investment deal that promises returns that are too good to be true, it probably is.

So, for the average investor, Wheelan advises that the best strategy is to pick a simple index fund and stick to it, because:

• The market may behave irrationally, creating opportunities for profits in the short run. But, it’s not easy to make money off these irrational behaviors in a consistent way in the long run.

• The average investor can’t outwit the markets and hence shouldn’t even try.

This idea is also covered in Unshakeable by Tony Robbins and The Psychology of Money by Morgan Housel.

3. Diversified

Spread your investments over different entities that are independent of one another. For example, diversify your investment portfolio by including a mix of asset classes such as stocks, bonds, real estate investment trusts (REITs), and mutual funds. You could also utilize various investment vehicles like ETFs, fixed-income investments, and alternative investments to spread risk across different sectors and industries.

4. Invest for the long run.

Investing for the long term is always the best strategy. For instance, contribute regularly to retirement accounts like 401(k)s or IRAs, which are designed for long-term growth and often come with tax advantages. Perhaps consider target-date funds, which automatically adjust the asset allocation as you approach retirement, making them suitable for long-term investors. As Warren Buffett says, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes”, and “our favorite holding period is forever.”

FINAL THOUGHTS

Whether planning for individual retirement or aiming to grow your wealth, making regular contributions to your investment portfolio is crucial. This article outlined a sure-win investment strategy that emphasizes saving, taking calculated risks, diversifying your investments across different asset classes and sectors, and investing for the long term.

You may think it’s “old-school” advice; however, following these tips is truly one of the most predictable ways to reach your investment goal. These tips help you make sound financial decisions, create a well-rounded portfolio, and secure predictable returns while minimizing investment risks. This approach allows you to take advantage of market fluctuations and enhances your financial stability.

Consider consulting with a financial advisor, before making investment decisions to maximize your investment returns. They can offer valuable guidance on assessing level of risk and selecting various stocks and other investment options that match your financial goals.

If you’re based in the USA and wish to get your finances in order, do check out I Will Teach You to Be Rich by Ramit Sethi. Or, learn more about investing in index funds for fuss-free diversification. This is explained in many of the books highlighted above.

Obviously, you can also apply powerful tips from books like Think and Grow Rich, The Secret, Secrets of the Millionaire Mind etc. to hasten the process through your subconscious mind. Let’s just not forget the fundamentals and good ole’ common sense.

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How to Invest Money for Predictable Returns