Welcome together, we're going to explore our personal finances and figure out how to improve them. Whether you're just getting started in life on your finances, or you may already have a home, a car payment, and you're struggling to get credit cards under control, or you may be getting a late start in life on saving for retirement, reduced that increased wealth.com is a podcast to educate those to improve personal finances, whether it's eliminating debt, or making smart investments. Hello, Mr. Chuck here, in this episode, I'm going to start talking about investing. Maybe you listen to a previous episode I did investing for dummies, you have a basic understanding. And maybe you even went out and did some studying and on your own and gain some more knowledge, which is always a good thing. I'm going to assume that if you're thinking about getting started investing, if it's not a 401k through work, or your own IRA, if you're self employed, or don't have a retirement plan through work, that you have your credit card debts under control, or you least have a plan. And you're working on getting your credit cards under control, and some of your other loans and debt under control. You have a emergency fund built up to the point where you feel comfortable that you can start investing in the market. I got a couple articles today. And they're going to be in my show notes. The first one is how to start investing seven simple steps. And the second one is how to become a above average investor. And if you're just an average investor, you're not going to beat the market. In fact, there's very few people ever beat the market. And so we're gonna start with how to start investing seven simple steps. He want your money to start working for you. So that you don't have to that is the premise on why you want to invest. as Ben Franklin famously said, the money that earns money earns money. Have you ever seen a rich middle aged dudes with white hair and loafers who looks so children walking around the mall? The reason they look so chill is that they have money making money somewhere. And they don't have to think about it. They enjoy life while they build wealth. And well, building wealth through investing is one way. The other way to build your wealth and net worth is to reduce your debt. That's why this podcast is called reduce debt increase. Well, there's two ways to increase your wealth, reducing your debt through investing and having your money work for you. There's two popular myths about investing, investing, complicating, and investing gambling, which both of those are not true. It's not really complicated. And it's not really gambling. You may think it's complicated because you're lesser informed, the more knowledge you gain about investing, the easier it will become. It's not gambling, because you control the amount of risk that you take while you do your investing. Investing isn't gambling because you can control the amount of risk that you take. And there's anything everything you can invest in that goes up over time from art and cryptocurrency to tax liens. And but the three most secure investments are stocks, bonds, and real estate. If you own your own home, or if you're paying for your own home and buying your home, you're already have one of these investments, real estate, your home will go up over time. And if you take good care of it and you maintain it, and it's in a good location, it will increase in value over time. And that is one your first investment so you really are not new investment. You're just maybe not aware that you're investing in your home, which is real estate. stocks, bonds is a different thing. That before you can even start figuring out what to invest in. You need to figure out how much you can invest. Can you put $50 of pay$10 of pay. If you have a budget, and you're putting money into a savings account, you have your emergency fund built up, you pretty much are aware of how much money you have available to invest. This is money that you will not be needing, and the immediate future, to say the least. So and then you got to set up what are your goals? Why aren't you investing for? are you investing for retirement, that would be your 401 K through work, that would be an IRA if you're self employed, or an IRA if you don't have any retirement plans through work. So that would be your step, if you got a 401 K through work, the minimum amount you should be investing is what your employer is matching. If your employer is matching 3%, you should be putting in 3% of your gross pay. If your employer is matching 5%, you should be matching 5% of your gross pay. Because whatever you put in your employer is matching, that's doubling the amount that you are investing. Why are you not doing it? If you have a retirement plan through work, and if your employer is matching, you're just giving away money. That's free money, that's money your employer is willing to pay you for doing the same amount of work that you're already doing. So why aren't you doing it. And within a 401k, you're going to be limited to what items you can invest in and you need to do your homework, you need to study and gain knowledge of all the investments that you can invest in and which ones are better, some are better than others. And what's your risk tolerance. And what's your long term strategy you want to the younger you are the higher risk you should be able to take and more towards stocks. The older you get, the less risk tolerance and a greater percentage to bonds. You can go and read articles on the internet or anywhere else that gives you templates of what you should be investing in. And the key word to this is diversification. If you put all your eggs in one basket, and you drop the basket and you break all the eggs, you're not going to have any eggs left. And what you should be doing is pick out three items in your 401k three investments that you think are maybe the best possible based on your risk tolerance. And if you're putting, let's say $10, a pay in $3, and a $3, and B $4, and C, now you're diversified, you got your money spread out. Even you might think it'll take longer, but in time, it won't. If you increase the amount that you're putting in there, then you put the $4 in a different one, and three and three. And then if you add another $10, so you're up to $30, you're putting$10 in each one of them. And on you go that is key to being successful is the first certification. Because the market you never know what's gonna do sometimes tech stocks are doing really great. And everything else not so good. So you won't have slummin tech. And then when a tech stocks are not down, maybe grow stocks are doing good. So you need some and growth. So if you balance that out, whatever is up, you're getting advantage. Whatever is not up, you're not losing a whole lot and it evens out. So you're drops in when the market drops to say 10 points and you're rolling and dropped maybe five points. So your drops will be less your gains will be less. But it's kind of even out over time. Remember this long term investment. If you're gonna have some short term goals, saying less than five years, you need to keep that money in a savings account. You can go with a high yield savings account or money market which sometimes a high yield savings account is a money market and the money market is every share is worth$1 no matter what the The value is and when it goes up, that's just a gain, when it goes in and pays you interest, it's usually pays higher rate of interest. And sometimes if you're gonna be even longer than that, and remember, this is money, it's easy, it's liquid, you can get to it fairly easy. So it can help you with your emergency fund. Just think as your emergency fund is bigger than what it actually is. So you got an emergency fund, and then you got a high yield savings account that you don't want to touch. And once you get that built up, say that $5,000, maybe can look at Certificate of deposits. And you want to do what they call a ladder, oppose approach, six month yield, matures in six months, and then the next one, and matures in one year, and the next one matures, in 18 months, every six months, you have a CD maturing, and then you can just roll it over, and just keep the flow going. So every six months, it's gonna mature, you're gonna reinvest it, and on and on, you go that way, if you need access to that money, the worst you have to wait is six months, and you can get to some of the money without having to pay early withdrawal penalties. And then your long term of this and five plus years in the future, you already have your retirement setup through work. So you're doing good there are a lot of new investors will get into index funds. With a set retirement date, so they look in the future, when can I retire? My falses. So security age is when I'm 67. That year is what the index fund you should be targeting. And then the fun, you just put the money in, set it and forget it. The younger you are, the more aggressive the be invested, the older you get, the less impressive so it does all that for you in no follow some index or something, I'm not really sure. But after a while, if you're studying and you're gaining more knowledge and you get more comfortable, and investment, you can always sell that and re apply the re invest the money in a better strategy that maybe could give you a little bit better game. And you're not always stuck in what you buy, if you put it in and next one and it could be in there for five years, you can sell it at any time, you don't have to wait till you're 67 they get the money, you can sell it and reinvest it. As your level of knowledge increases, and you're going to be more confident, the more confident then you can start picking maybe some mutual funds on your own, you know about diversification, you know which ones are doing better than other ones. And maybe your risk tolerance went up a little bit, you can assume more risk because you're confident that the markets not going to die and you're not going to lose all your money all at once. For pick what goes in your long term retirement investment accounts in there, get what we just talked about, invest as much money as you can and tax advantaged accounts. Taxes are the biggest drain on your investment returns. So you want to minimize your taxes as much as possible. And a good idea is to learn about taxes. How does your taxes affect your investments. So if you have an a retirement account, it's not going to affect your taxes. It's all tax free. The money that you put in there is going to be tax free, you're not going to pay income tax on it, you'll pay Social Security and Medicare tax on it or self employment tax for the self employed. You're not going to pay federal or state income tax on it. When you take the money out upon retirement, then you're going to pay taxes and then you can control how much you take out versus how much taxes you're gonna pay. If you have investments that are not in a retirement account, then you need to know about the tax problems that that could create. If you buy something low and you sell it high because that's what you're always wanting to do. You have a capital gain. What's my tax is going to be on that capital gains, dividend income interest income, what's my tax is going to be on That income. So you can go to the irs.gov and look up a publication, and I'm sure you can just do a search, find investments, maybe capital gains, so definitely be one. And you can get publications that explain and give you examples on the tax consequences of things that you're going to do. If you want to be a day trader, then you definitely need to know how the taxes are going to affect you. And number six, invest early, often and as much as you can, the earlier you start investing earlier mean, the younger, the more time you're gonna have, and time is on your side. Because over time, the stock market's gonna go up. And I've like, told you in previous episodes, that if you look at the market, from day to day, it's gonna be up, down, up, down, up, down. But if you look over a time period is going to be a gradual slope up either at 6% 7% 8% gain over 10 or 20 years, some years, that could be a 20% gain some years, it could be at 10%. loss, but over time, is gonna even itself out and be either six to 8%, somewhere in that ballpark. So as your money grows, certain investments you make may grow faster than other ones. So you need to rebalance your accounts at least once a year. What I mean by rebalancing is you whichever one, let's say that you have three accounts that each should be 33% of your investment, but one has done really well. And now it's 50% of the investment. So you need to sell off some of those, and take that money and put it in the other two, so that you can balance out your percentages of what you got invested. So you can remain diversified across the board. And you need to keep track of your investments, if you just check it once a quarter, that's every three months, every six months or once a year, you're gonna get statements from your investor service. So you just need to look at and see how they're doing. Maybe look to see how other investments are doing. Maybe you can change them around and fine tune it so you can get a little bit better return. Knowledge is key to everything. So the more knowledge you have, the better off you're gonna be. My second is really not an article that it's from a asset management company, it's online, it's my second link. The five key characteristics of a good investors that an average investor uses his money to invest and invest the rest. A good investor invests his money and use the rest. I guess as an average investor, you pay all your bills, and you live life. And if you have money left over you invest it. But if you're going to be a good investor, and you're gonna invest your money first, and then live on what's remaining, that's what that means. And investing is a risk versus return game. Well, some and may millions many have lost as well. And learn the key characteristics of a good investors so you can become one and number one is goal setting. Failing to plan is planning to fail and a good investor will always have a clear goal, it's very important to have a plan to achieve this goal variations most likely 10 to divert an investor from the agenda having a plan of action within a defined period of time for a particular return on investment is a sign of a good investor. They are prepared for the end certainly of the market. Well they plans are usually made considering both sides. What they're saying here when before you buy an investment and how long you gonna hold it. You gonna hold it for 12 months, 24 months, five years. You know what your plan if it goes down? What you have to have a plan for if you lose money, how much are you willing to lose? If you gonna lose 10% are you gonna sell it when it loses 10% or he got a hold on hope it goes up. A good investor has a plan and overall plan from before you buy it to what happens while you're holding it during the holding period that you plan on keeping it to the end of winter. You want to sell it, then what are you going to do with the money after you sell it? That is a plan, knowledge and when you know better, you do better. Besides utilizing time to the best a good investor possesses knowledge of the market. See, he or she understands the positions of funds, and has researched about the company investment and investment strategy and philosophy he didn't need you need to know where your money is being utilized. A good investor analyzes the growth pattern of the company over the years from genuine sources. On the accounts of the end pistol anticipation and knowledge a good investor will have a defined plan for exit point as well as an active learner who's open to make right choices on the basis of genuine knowledge is a good investor. right decision, listen to the world but do what is right. A good investor knows the time they keep an eye on current scenarios in the market. They update their knowledge about market activities and growth, having a sound understanding of trends enabled investors to overlook their plants and inside the terms of investment. Having an understanding of current trends and company positions makes one a good investor. they own their mistakes and learn not to make them again, it's not necessary that the good investor jumps into the trends. He or she just does what is right. And what is right for you may not be what the trend is. Patience, keep calm and carry on. over the period of time a good investor creates wealth dude, his patience is probably the finest quality have a good investor has faith in his plans. They usually do not feel about the 10% downtick, they would rather sit tight and celebrate the hundred percent uptick. They are persistent about sticking to the plans, they usually do not get into the buy and sell trends and patience. member, if you're gonna buy low and sell high, you're going against the current trend. And when everybody is selling, the prices are going to be dropping. And that's by low when everybody is buying. That's when the prices are going up. And that's when you should be selling. So patients don't go with the trends. You maybe it's better to go against the trend, risk aversion Know thyself. A good investor knows the inherent risk in investing, they understand their plans and analyze their expected returns. Being risk averse is a quality shaped by experience, knowledge and confidence over the above mentioned key characteristics. So know yourself, be patient and understand everything that you're doing. Okay, we covered over a little bit of information there. You might be wondering, do I need a stockbroker? How do I make these investments? How do I buy stocks and bonds? Well, if it's through a 401k, or an IRA, your 401k is already set up for you through your work. He probably they re have a stockbroker or a somebody that's managing their plans for them. When you set up an IRA, you would go and have a trustee. If you go to a bank, they want you to put it in, you know, certificates of deposit. If you go to a stockbroker, then they'll set an IRA up for you so that you can invest in stocks and bonds. And so it depends on where you go to set up an IRA. If you're not too excited about dealing with a person and then the robo advisor is probably for you. And if you're a little bit timid, or don't have the time to go talk to a stockbroker, or you don't have enough money where a financial advisor will take you on as a client and then a robo advisor is good because you download an app to your smartphone or a computer and it has a lot of information in there and you can pick what you want to invest in. You can set up your recurring investments. You know how much money you want to come out of your checking account every week or every pay He can do all that without even talking to anybody. Most of these robo advisors have a retirement plan option, and they have a non retirement plan option, as you read their educational series and learn about investing, and then you can be more aggressive and more confident in what you're doing. So I highly recommend, for those starting out with one put little bit of money in, you can start it very little as low as $5. And you could put in $5, a week $5, a pay or even more if you want, and now get you started in the investment world, then when you get up to 10 or $15,000, then you can go and set up an appointment with a financial advisor and they'd be more willing to talk to you maybe go from there, they can seek and sell these investments at any time. In the future, you're not stuck with them. You can remember investing in the market is long term. If you make a mistake and invest in something that maybe is not doing very well, you can always sell it. And maybe after six months or a year or two years. So your it's very open. A robo advisor, investor app will do all those things for you. So check them out on the internet, and you probably will be happy you did. So that's the end of another episode. I hope you found it useful. And if you'd like to share this episode with your friends, please do so. I'm open for any suggestions for improvement, or for information that you would like to talk about in future episodes. You can go to my Facebook page and leave me a message. I am more than glad to respond. To find my Facebook page go to reduce that increase wealth.com and click on the Facebook icon