5 Truths that Will Change How You Think About Growing Your Wealth
As someone who invests their money, you already know that both Wall Street and the media can make it feel like a guessing game. Whether you’ve been either self-managing your accounts or working with a financial advisor, you may be detached from the process of investing.
One of the most common things I notice with new clients is that they lack an investment philosophy. Simply stated, an investment philosophy is a set of beliefs and principles that guide your decision-making process when it comes to investing. Getting down to the nitty-gritty of it, an investment philosophy informs when you buy and when you sell. In other words, it shouldn’t be a guessing game at all.
With a well-documented and evidenced philosophy, you can have a much greater sense of clarity over WHY you are investing a certain way and to what end. Without it, you may continue to feel distant from the very wealth you endeavor to build.
In this article, I want to help you make informed decisions toward building your wealth. Decisions that are rooted in purpose and aligned with your goals. Fortunately, the best investment wisdom is often the simplest. If you follow these basic, time-tested, easy-to-apply truths to managing your money, you may be pleasantly surprised at how effective you are at growing your portfolio with a newfound sense of clarity over how you’re doing so.
Let’s dive in. Here are five simple and elegant truths that will change the way you think about investing.
1. You need to do it to build wealth.
As you know, if you’re serious about building wealth, then you must invest.
You can take your income and stick it in a savings account where it earns less than inflation, or you can pay yourself first and put that money to work for you.
Investing, by buying stocks, is lending your savings to ambitious, competitive, smart CEOs for them to use to fulfill their firm’s mission and vision. In exchange, you are promised your pro-rata share of all company profits! It truly is the world’s best passive income. If you buy enough stocks – and of course you can buy lots of stocks at one time by buying mutual funds or ETFs – you can be pretty certain your investment will increase in value significantly over time.
Also, investing is all about risk and reward being correlated. In almost all cases, the lower the investment risk, the lower the return. If you are savvy, and you pick investments with higher risk carefully, you should expect to be rewarded with higher returns.
Of course, there are plenty of investments with higher risk that do not reward investors with higher returns, so do beware.
For instance, putting your money into a savings account with a 0.50% APY is low risk. But it’s also clearly a very low return. If you placed that same money into a mutual fund and earned 8% per year, your investment would earn significantly more money over the long run, because the risk is higher than a savings account.
The point is that if you want to grow your money into real wealth, you need to take on some risk and invest it. Working with a professional financial advisor can help you make the best, and safest, investments for your situation.
2. You can’t allow fear to drive your investment decisions.
Fear is a powerful motivator, and it rarely leads to great investment decisions.
When it comes to investing, you have to learn to ignore fear and never use it as a deciding factor. This is why having an investment philosophy is so critical. It helps anchor your investment decisions in the big picture. It helps you avoid reacting to a moment in time.
The market is unpredictable in the short run but quite predictable in the long run. There will always be some risk involved with investing. Especially early in your investing journey, fear will rear its ugly head to try to influence your decisions. Just remember your investment philosophy and hold steady. The worst thing any investor can do is react based on emotions rather than facts.
If you let fear take the wheel when it comes to the decision to invest, you’ll miss out on all the incredible opportunities that come with it. Trust the data – more than 100 years of stock market history says that a professionally constructed and diversified investment portfolio will grow your wealth exponentially. That’s real wealth.
This is where a seasoned fiduciary financial advisor can make all the difference. If you’re afraid of making the wrong move, partner with a financial expert who can show you where you should put your money…and put your mind at ease.
3. It doesn’t need to be complicated.
There is a common misconception surrounding investing. Most people think it needs to be complicated for it to build wealth.
It’s no surprise why. On the surface, there appears to be an endless list of investment opportunities. There are also markets to navigate, trends to monitor, and quarterly performance numbers to measure. Not only that, but there are a myriad of mixed messages from non-fiduciary investment “professionals”, armchair advisors, and DIY investors that can make the whole activity overwhelming.
Of course, you don’t want to lose money.
And there’s a lot on the line. Once you stop working, you probably don’t have the opportunity to financially recover from investment mistakes. Losses can lower your quality of life forever.
Better to have a trusted fiduciary financial advisor helping you understand your investments and who is able to provide objective oversight and management to keep you on track according to your goals and investment philosophy.
You can start with a simple plan, figure out how much wealth you want to build, begin with what you have, and delegate investing to someone you trust. Someone who comes armed with a time and battle-tested investment philosophy.
Plus, if you are ready to partner with a professional to build your wealth, you can apply to work with me. My team and I will walk you through our process to build wealth.
4. You shouldn’t try to do it alone beyond your comfort level.
Once you get to the place where your investments feel overwhelming or the consequences of making a mistake becomes paralyzing, it’s probably time to talk to a fiduciary financial advisor.
Naturally, as your money grows, the opportunities – along with details and risks – grow, too. Where should you put your money? What changes in tax laws and the investment markets do I need to be aware of? What tax laws and legislation will affect my financial affairs? How do I make my money work to grow my wealth even more?
While investing is not necessarily hard, it can get complex, especially as your wealth grows beyond your comfort level.
You only have so much time to spend managing your investments. And let’s face it, managing your life’s savings deserves an attentive eye and commitment.
Beyond just growing your wealth more, you will likely need to start thinking about estate and tax planning, retirement plan distributions, saving for your kid’s college education, charitable contributions, and the potential for long-term care needs.
Plain and simple, getting professional financial help should mean better financial outcomes as well as a better lifestyle overall.
If you have grown your wealth beyond your personal comfort level to manage alone, it may be time to get a financial expert to manage it with you.
5. Fees matter.
You may not realize it, but investing can come with a plethora of fees, some not as obvious as others.
For instance, fees to be aware of are that can cost you more in the long-run:
- High expense ratios of Wall Street funds
- Invisible commissions charged by non-fiduciary advisors
- Back and front-end loads investors can get saddled with when they work with someone who isn’t a fiduciary
There can be a lot of hidden fees when you work with financial professionals who are not a fiduciary. This is because how other advisors are compensated impacts how much you pay. Fiduciaries are required to provide transparent pricing, disclose any and all conflicts of interest, and detail every year any additional sources of income they receive. This is all regulated by the federal and state governments to ensure the best interests of investors are protected when they work with fiduciaries.
Work with Fee-Only Fiduciary Financial Advisor.
Investing can be a profitable adventure, but you need to know how to interact with the market or you are likely to suffer losses. You can transform your future and your family’s future with the right wealth building strategy.
Want to see how an evidence-based investment philosophy would look in an account custom built for you? Want to make sure you get the most out of your long-term money decisions? Talking to a fee-only fiduciary financial advisor can help you better understand the different investment strategies available to you and which one is the best choice based on your situation, goals, lifestyle, and all the things that affect your financial life.