There are certain things in life that you know you should have done but didn’t. When you realized that you made the mistake (or in this case not correcting it) it was too late because the time had passed and the ship had sailed.
Before you jumped into any conclusion, I’m not referring to something that I did and I regretted my decision. In this case I am referring to something that I didn’t do and now I regret it. I’m alluding to investing early for retirement and I’m hoping that anyone who reads this post and heed my advice and start investing.
I realized I made this mistake about 5 years ago when I noticed that I hardly earn any interest from all the money I saved in my savings. In fact, I have a large sum saved in the Preferred Money Market Account, which is supposed to pay higher interest than the regular savings. If I recall of the $50 K that I have in the account I earned less than $150 in interest. That got me thinking if I made the fatal mistake by putting everything in savings.
After I started working full-time I always put the money that I don’t use in savings. This is something that we learned at a very early age that we save all our money in bank using savings account. For the next 20 years working I continue to put all my money in the same account and it felt good seeing the balance keep adding up.
And was I wrong… I realized soon enough that I have been giving my money to the bank for use (that’s what bank does – it takes the money that lend it out or reinvest it) and I was not getting my fair share. Granted that this is not the only bank’s fault but also the economy itself. Banks will only pay the interest rate based on what the Federal Reserve Bank dictate. In turn the banks will use the government’s rate and unilaterally pay a much lower interest rate to the customers. I’m not an expert in this field so I won’t attempt to explain any further.
For the last several years I’ve been doing some reading and researching during my free time (like almost never). I read several articles on how many young people in their mid-30s become millionaires. In each articles they mention only one thing, “investing”.
For the purpose of this post, investing refers to buying stocks or bonds in the financial markets. I’m not referring to investing for retirement such as 401K or IRA because it is a very different subject. Investing comes with certain risks because the market can be volatile. You could invest $10 thousand today and you could lost all of them tomorrow.
I am currently reading a book titled “Quit Like a Millionaire” by Kristy Shen and Bryce Leung. The book talks about how to become a millionaire by investing smartly and find loopholes in the system. They are able to make their first million and quit their job. Using the income they earn from their investment they are able to travel the world 365 days a year.
Obviously I do not see myself quitting my job and just focus on investment. There is an inherent risk in this idea. Additionally, I have a family that I need to take care so quitting my job is out of the question. My short-term goal is to be able to earn passive income by investing in stock market. Ultimately I want to be able to retire comfortably without worrying if I am every able to pay my electricity bill.
As a declaration, I am not a financial planner nor a stockbroker. I am not in the position to give any investment advise. It is better to leave this to the professionals. In this post and subsequent post, I want to highlight several things I learned that I believe will be beneficial to anyone who wants a better financial outcome other than what Social Security can provide us.
Investing in stock market 5 or 10 years ago was reserved for the rich only. Anyone who wanted to invest in the stock market would need to have a large sum of money saved and would willing to pay a high commission to stockbrokers. The incentives to invest our hard earned money were not there.
Today is very different. New ideas and technology are popping up everywhere. That give rise to business model that allow regular people to invest in stock mark for free. The app that I use is Robinhood. Buy and sell stocks are easy and commission free. Hence, there is no reason not to invest. Obviously, before buying any stocks please do your homework and ensure you are not investing in risky stock.
Each stock have metrics and numbers to assist buyers in make the necessary determination. For someone who is new in stocks, I would highly recommend that you invest in reputable companies such as Microsoft, Apple or Disney. Keep in mind that while some companies are reputable, they may not do well in the market. For example, Macy, JC Penney and GE are some of the companies that you should stay way from. Keeping abreast of current news will help.
Next post I will touch on what to invest and what it means by diversification. Subscribe to my blog so you don’t miss any of my post. If you are interested in this subject I highly recommend that you Google it or do a deeper research.