I remember my grandma’s firsthand experience
about the time when she received a massive retirement bonus from her job, upwards of
a quarter million dollars. And this was back in 1995, so you know that money was worth
a lot more than it is now. She was thrilled. And then she became convinced to invest that
money in stocks. So, she did. All of it. Every single penny was given to a company to invest
in stocks. And guess what? Like a magic trick from your favorite magician, before you know
it, that money went poof, it disappeared without a trace. Needless to say, she was devastated.
But the good news is this book will help many avoid making similar mistakes and hopefully,
this video will too. Bear markets occur every three to five years.
And when that happens, the market declines on average about 30% to 40%. During this time,
we panic, pessimism rises, and we begin to fear that the market won’t ever recover.
But outside of all the doom and gloom, there are a few who see this crash as a time for
us to invest more money at lesser costs. These brilliant minds know that the crash is one
of the greatest opportunities in our lifetime to move up the ladder.
You know why? Because everything goes on sale when the economy
drops. While people and shop owners are caught by surprise, completely unprepared and then
forced to sell their luxury homes, diamond jewelry, and Lamborghinis at 50% off, you
and I are capitalizing on these real estate and stock investments at incredibly low prices.
One of the greatest investors of the last century said, “the best opportunities come
in times of maximum pessimism.” Tip number one is “the best time for you to invest
is during a crash.” So, I started to realize that the greatest
danger to our financial health isn’t a market crash; it’s being out of the market. And
since you can’t accurately predict the rise and falls of the market, one of the most fundamental
rules for achieving long-term financial success is that you get in the market and stay in
it for the long run. But that begs the question; which stock investment
should you make? Well, this book recommends a solution that
allows us to make money almost entirely on autopilot. The solution is for you to buy
and hold on to every stock in an index such as the S&P 500. This includes companies like
Apple, Google, Amazon, and Facebook, which (by the way) are the four companies that are
in a race to become the first trillion-dollar company.
Also, an index fund protects investors against high transaction costs and taxes due to making
fewer trades. This is a strategy recommended by Dalio, Swenson, Warren Buffett, and Jack
Bogle. Tip number two is “the safest and securest investment you can make is on index
funds.” Now let’s look at a great example from the
book. Imagine that two friends, Joe and Bob, decide to invest $300 a month. Joe gets started
at age 19, keeps going for eight years, and then stops adding to this pot at age 27. In
all, he’s saved a total of $28,800. Joe’s money then compounds at a rate of 10% a year
(which is roughly the rate of return of the US stock market over the last century). By
the time he retires at age 65, how much does he have? The answer is $1,863,287. His small
$28,800 investment has grown to nearly a two-million-dollar investment.
Let’s look at his friend Bob. Bob gets off to a slower start and begins investing the
same exact amount ($300 a month) at the age 27. He’s a disciplined guy and keeps on
investing $300 a month until he’s 65 – a period of 39 years. His money also compounds
at 10% a year. The result? When he retires at age 65, he’s sitting on a nest egg of
$1,589,733. So, if we step back for a moment, we can see
that Bob invested a total of $140,000, which is almost five times more than the $28,800
that Joe invested. Yet Joe has ended up with an extra $273,554, even though Joe never invested
a dime after the age of 27! Because Joe started earlier, the compound
interest he earns on his investment brings way more value to his account. The point of
the story is that compound interest is a force that can catapult you into a life of total
financial freedom. Tip number three is “you don’t need a lot of money to be wealthy;
you need time.” Today’s winners are almost tomorrow’s
losers. Don’t let that be you. One of the biggest mistake you can make when getting
into financial investments is relying on a financial broker to manage your portfolio.
First and foremost, they are loyal to their shareholders and the big money commissions
they make by putting you on expensive actively managed funds. You might end up with additional
fees and taxes that will destroy your possibility of generating a passive income stream.
Like the story about my grandma, these companies are incentivized to create bigger profits
for themselves. This is a zero-sum game that you don’t want to play. Give your trust
to someone qualified who has your best interest in mind. Registered Investment Advisors, like
doctors and lawyers, have a fiduciary duty and a legal obligation to act in your best
interest at all times. Tip number four is “your financial broker will make you broker.” The thing is so many adults my age are not
investing. According to the book, about 50% of Millennials distrust the financial markets
and keep a great amount of their savings in cash. If you want to be certain that you’ll
never lose your money in the financial markets, then you can keep your savings in cash—but
then you’ll also never stand a chance of achieving financial freedom through investing.
As Warren Buffet says, “We pay a high price for certainty.” What he could have added
was that we also pay a high price for fear. If you live in unwarranted fear, you’ve
lost the game before it even begins. How can we achieve anything if we’re too scared
to take a risk? You have to focus on what you can control,
not on what you can’t. When you become unshakeable, you have unwavering confidence, even amidst
the storm. You are no longer trapped by circumstances or by fear of the coming market crash. At
the same time, you don’t want to be too confident. That can lead to making bad decisions
such as relying heavily on one stock (like Apple) or trying to predict market corrections
and fluctuations. Remain clearheaded and use logic over emotions. Act on the basis of knowledge.
Tip number 5 is “Don’t invest emotionally in your financial investments.” If you know someone who is not a financial
genius and may benefit from any of the five tips in this video, then please, share this
video. And of course, if you like the video, leave a like. If you like the channel please