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- What is the Secret of Money? ...of making money? ...of building wealth?
Watch the Riddle of Steel
Like Steel, money is nothing unless it is wielded; and in this case the flesh-wielding is done by virtue of investing in business via stock markets, (or other income producing assets, like real estate).
The steel sword is worthless unless it is in someone’s hand, being properly employed to do its job. Likewise, money is useless if it's in your mattress, or nearly as useless earning next to nothing in a bank account. Money needs to be respected by being properly employed, needs to be put to work, needs to be wielded, and working for you, as an investment earning a big, fat, juicy, worthy return!
- Always be making money, even while you sleep!
The only way to make money while you sleep is to be invested in profitable stocks and businesses. Business is always being conducted, 24/7, 365 a year, somewhere on the planet at every moment. Own a piece of that business, let it work for you generating returns even while you sleep.
Always invest whatever you can afford bc those companies will be working even when you’re not, whether its a single company like Exxon-Mobil operating in all 24 hour timezones every day of the year, or e.g. an index or “mutual fund” which is a basket of many company’s stocks in one fund; whatever you choose, get your piece of the 24/7 action!
- When all other things in the economy are equal, no dollar works harder for you than the first one you invest!
This is because of the nature of time and compounding reinvestment.
So, all other things being equal, if I invested ten years ago and let that money reinvest that investment will earn more money for me right now than an equal amount I put in today, bc it’s had ten years time to reinvest, compound, and build itself up, acquiring more earning power. (Not to mention, exceed the eroding power of inflation)
The thing you can’t get back in investing is time. Once time passes, it passes forever. Investment is about compounding and reinvestment and dividends and interest and capital gains. You need as much time as possible, to max those functions, which if done properly will get you exponential returns.
The first dollars you put in, may ultimately be initially put into a bad investment, or at an unfortunate moment of time, (mistiming the market), but there’s nothing you can do about it b/c no one has a crystal ball; just use the best information you have available, evaluate later when necessary. Over the long run it will make little difference, even if you have bad luck to start.
- Do not try to “time the market” or guess a given stock or fund price, when it will be up or down, to make a buy, or a sale.
As stated, no one has a crystal ball. What you do have is a wise long term strategy. Unless you’re an experienced day trader, make trades for the LONG TERM and stick to a long term strategy.
It is ok to occasionally change what you’re invested in, if you think something else might be better than something you’re currently in, but not too often; what you don’t want to do tho, with rare exception, is pull your money off the table completely, keep it in the game via one investment or another!
(It is easier to make strategic investment changes in a Roth, b/c there are no tax implications, so you can change without worrying about what the IRS ramifications are, but that still doesn’t mean changing horses more often is better, b/c it rarely works out that way even when not worrying about the IRS)
Also, don't make the classic mistake of selling out of an under-performing fund, or buying into an over-performing fund. If a fund for the retail sector is over-performing, that's one you don't want to buy, but might want to sell, b/c its price will be higher than normal. Conversely, if a fund for the healthcare sector is under-performing, that's one you might want to buy while the price is low, but wouldn't want to sell, b/c that means you will realize actual losses, when if you were just patient, its likely it would eventually come back for you.
When others are fearful, (the market is tanking), that's the time to be greedy, and when others are greedy, (the market is rallying), that's the time to be fearful. When others sell, you buy! When others buy, you sell! (Unless of course ur too smart to do either and just hold for years no matter what) Understand the power of contrarian thinking!
Knowing when to sell is always harder than knowing when to buy, but no one ever went broke realizing a gain (i.e. selling for a profit).
Summary:
Einstein is often credited for saying that compound interest is the most powerful force in the universe. This is true, EXCEPT for reinvesting in the market, which is even more geometric / exponential, and ergo, even more powerful.
Give your money the time and respect it deserves, and it will take care of you. Invest early and often and you will eventually be rich!
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I love your analogy between money and steel!
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