Once upon a time, I had a boss who was very blunt, quite direct and bit rough around the edges you might say. He said what he meant without a bunch of fluff. I thought I would channel his words to explain this investing game in ways that no one can misinterpret. If you are the sensitive type, you might want to find yourself a safe place. Sometimes the truth can be painful. Suck it up Sunshine, he would say. I said yes Sergeant!
Investing your money wisely to create financial freedom is simple, just not easy. You work hard at your main job, get a side hustle going to make more money, save a good chunk of what you earn (at least 20%), invest automatically every month as early in life as possible in low cost stock index funds and then keep doing it for years and decades. Compound interest will do the rest. The End. Don't screw it up!
What about individual stocks? Are you delusional?! The odds of you picking the winning stock from thousands is ridiculously low. You have better odds of walking into the casino and putting everything on red. If you gamble with investments, you will lose most of the time, just like the gambler. Don't be a schmuck. Buy stock index funds that own thousands of businesses. Learn more here.
What about whole life and bank on yourself, also called infinite banking? Are you kidding?! This shell game is for people who think insurance companies actually create products to make you money. They don't. They create products to make them money. The fees and commissions a whole life policy charges are outrageous. The insurance company and the agent get rich. You don't. Don't be a sucker. Learn more here.
Annuities are better, right? Are you stupid?! The commissions and fees are ridiculously high, which is why you keep getting invited to that "free" dinner that you pay for when you buy an annuity. If you hang out with life insurance agents long enough, you will get sold. Think about it. If they are making a lot of money selling the annuity, who is paying it? It's you, the dupe who buys into the sales pitch. Learn more here.
Should I keep my money in the bank? Are you a blind?! The bank pays you .1% and loans your money out at 7% while inflation runs at 4%. They win and you lose, don't be a loser. Get your short term money in a money market like VMFXX at Vanguard so you can at least stay up with inflation or close to it. Get your long term money in stock index funds like VTSAX and VSIAX to stay ahead of inflation. Learn more here.
What about bonds? High quality bond index funds might keep up with inflation. Those funds own highly rated corporate and government bonds. Stay far away from high yield bonds (junk bonds), the yields are certainly higher and the risk is much greater, closer to stocks than high quality bonds. Stay away from junk bonds and buy VBTLX only when you need some low risk money. Learn more here.
Should I buy Gold and Silver? Do you think the world is going to hell in a hand basket?! Those precious metals suck over the long term. They are not good inflation hedges and they are not going to save your ass if the economy collapses. You can hug your Gold all day long. It won't feed you and it won't protect you from shit hitting the fan. Wise up and quit listening to the doomsayers. Learn more here.
What about managed mutual funds? Do you not read?! There is decades of research showing that managed mutual funds continually underperform a simple index fund owning the same assets. Don't be a fool. Why would you pay higher fees to get lower returns? Cut your fees and increase your returns with index funds and stop being an ignorant schlep pulled along by your ear. Learn more here.
What about crypto? Do you like skydiving with a parachute packed by a teenager? Index funds work. A professional packs the parachute, not a teenager scrolling on their phone. Why would you take unnecessary chances when the index fund is there, making you rich over time? Go ahead and bungee jump with a rope that no one has ever tested. I will come back later and see how it turns out. Learn more here.
What about investing in my personal home? Can you do math? Your personal home is an absolutely terrible investment that you are almost guaranteed to lose money on over time after you factor in the expenses. That home is a money pit that will cost you a great deal of money over time. You buy a home to raise a family, not as an investment. You buy index funds to reach financial freedom. Learn more here.
What about real estate that I rent out? Do you like sticking a fork in your head? Tenants don't always pay their rent. They and their pets damage property. You have to spend a lot of money maintaining the property and paying taxes and insurance. It's a pain the ass. Dude, just buy a stock index fund owning commercial real estate, VGSLX. There are no headaches and better long term returns after costs. Learn more here.
What about land that produces income? First, almost all people cannot afford land. The initial investment is incredibly high that involves going into a whole lot of debt. For those selected few who can afford (someone will give you the loan) to buy land, you better know the cost of ownership is not low and the headaches can be unlimited. Index funds have almost no cost and only the occasional headache. Learn more here.
What about collectibles? Are you brain dead?! Collectibles are a terrible investment. They just sit there and produce no income month after month, year after year. Whether you are thinking about art, cards, photographs, old shit nobody wants, or whatever, you are simply hoping some sucker will pay more than you paid right now. It will sit there and usually do nothing. Don't be stupid. Learn more here.
What about gambling at the casino or on sports? Are you an idiot?! That shit is for entertainment only. If you think you are going to make money over time going to the casino or spending your days on sports betting, you have a few screws loose. Gambling comes out of the entertainment budget, not the investing budget. Screw that up and you will end up with nothing! Learn more here.
Okay, that's enough bullshit that you should avoid. Get smart, Sunshine. Buy low cost stock index funds as early in life as possible (as soon as you are born would be ideal). Keep buying those stock index funds month after month, year after year, decade after decade. Increase the fixed income piece (high quality bond index funds and money market fund) as you get close to withdrawing. The End.
