How To Invest In The Stock Market AND GET RICH

How To Invest In The Stock Market AND GET RICHEveryone needs to know how to invest in the stock market if you ever want to truly be rich.  It seems like a very simple thing to do, but many in the world do not know how to properly invest there money.  They base their knowledge off of movies like Wall Street or Wolf of Wall Street.  Two very fantastic movies anyone would love, but nothing like reality when it comes to the average working person investing.  The stock market is a great way for people to build substantial wealth, but you need to know how to invest money in it the right way for that to happen.  I will start out by stating that everyone is very different in their needs when it comes to investing.  Depending on your age, investing will mean something different for you.  If you are young and have a few decades of time to let your money grow, then you will be very aggressive in your buys.  But if you are nearing retirement, then your types of investments will be more of the safe variety that do not offer as much upside potential as the more aggressive stocks.  The question for you is, what kind of investments do you need to maximize your returns?  The following steps will help you decide what is right for you.

Step 1:  Pay Off Your High Interest Bills

How To Invest In The Stock Market AND GET RICHThe one thing people want to know from me is how to invest in the stock market?  My answer usually shocks the person asking me the question.  I bluntly ask them if they have any credit card debt?  They ask me what that has to do with investing in the stock market?  And I always end up explaining how carrying credit card debt can suck all your profits away from your stock portfolio over the long run.  It goes a little something like this…

The average family household in America is carrying $15,607 worth of credit card debt according to Nerd Wallet.  Now let’s consider that the average rate of interest on variable rate credit cards right 15.68%.  That means that this family will be paying about $2,400 in interest every year.  To make this very basic, that means that this family who just asked me to give them a great stock pick, will need to earn more than 15.68% per year in the stock market for it to make sense to even invest in it.  If you want to know how to invest in the stock market, you will want to be credit card debt free.

It is usually at this point that I sit them down and explain that they will need to be free of this high interest credit card debt to really start investing.  If they have $15,000 to invest or pay off this debt, I have to explain to them that paying off the credit card debt is easily the better choice.  The odds of earning that $2,400 in the market consistently is just about nonexistent.  The best thing anyone can do first is to get rid of all high interest debt before starting these personal investing portfolios.  Now keep in mind, that I am not talking about company sponsored matching 401k’s, but I am talking about investing that extra money that you have sitting around.  If you are in the boat of considering the above situation, don’t hesitate to pay off that high interest debt first.

My final piece of advice when it comes to paying off your high interest bills or investing money in the stock market is to just be smart about it.  I usually say that if the interest rate on you debt is around 8% or under, then I think you are safe to put that money in the stock market or pay off your debt.  If the debt happens to be tax deductible and at a single digit rate, then you will probably want to let that go.  Just be realistic in what you expect to earn in the stock market.  The average yearly return of the S&P 500 over the last 10 years is about 8%.  So in other words, if you have interest higher than 8% on your debt, you would probably be better off paying that off first and investing second.

Step 2:  Take Advantage Of Tax Deferred Investment Options

How To Invest In The Stock Market AND GET RICHIf you are going to learn how to invest in the stock market, then you should try to max out your 401k and IRA options.  There are annual limits.  For 2016, if you are under 50 years old, you can contribute a maximum of $18,000. If you’re 50 or older, you can make an additional catch-up contribution of as much as $6,000, for a total of up to $24,000.  Now if you go this route, you will be able to deduct these investments from your taxes for the year you made the deposit.  Now on the downside, you will need to realize that you will not be able to get at this money without penalty until you are of retirement age of 59 1/2.  There are some instances that you will be able to take it out penalty free, but that is for another article.  Depending what tax bracket you are in, you can save a ton of cash in taxes from investing in a 401k.  This will give you instant returns that you will not get from investing outside of a tax advantaged vehicle.  A nice for instance goes something like this…

You invest $10,000 in a E.T.F. that earns you 8% for the year which gives you $10,800 at the end of the year.  Because that was not in a tax deferred vehicle, your overall return is basically $800.  Now you invest in a 401k and earn the same 8% for the year.  You end with $10,800 and then get to write off $10,000 in income on your taxes and therefore save an additional $3,000 that you wouldn’t of had.  Now you have $13,8000 to work with next year to invest with compared to the $10,800 from the other account.  Let’s do 1 more year.  For year 2, the $10,800 earns another 8% and ends the year at $11,664.  Now for the 401K example, we end up investing the $10,800 + the $3,000 we saved on taxes for the year and earn the same 8%.  This will end up giving us about $14,904 in the account at year’s end.  But remember that now we can write off the $3,000 we put into the account and save approximately $900 on our taxes this year for a grand total of $15,804.  You can see that after 2 years, we now are working with $15,804 for the 401k account and only $11,664 in the regular account.  This is a huge difference of $4,140 that you will have in additional investment cash.  If we carry these calculations forward for many years forward, you will be looking at a huge difference in cash.  Now you will have to pay ordinary taxes on your money when you finally take it out, but there are a ton of things you can do to minimize the taxes during that time as well. (I will write about that in a later article)

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How To Invest In The Stock Market If You Are In Your 20s Or 30s

How To Invest In The Stock Market AND GET RICHI am not going to get into why it is so important to start investing as early as possible.  The fact that you are reading this article tells me that you are correctly concerned about it and ready to take action.  I look at it this way, you are not going to really need this money until you retire.  If this is the case, then you will have about 30 to 40 years to let this bad boy grow into a monster portfolio.  They say time heals all wounds.  This is absolutely true for investing wounds as well.  During your 30 to 40 years of investing, you will survive recessions and maybe even depressions.  But the likely hood of you earning about 8% a year throughout those 30 to 40 years is very high.  So the longer you are invested, the more compounding your account will do and thus the more cash you will have to spend on those golden years.  Take a look at this book here to have a very nice guide for your 20s and 30s.

The main question people usually ask though is what should they invest in?  I highly recommend people to plainly invest in a E.T.F. of the S&P 500 for the life of their investments.  This will give them a great dollar cost average over the 30 to 40 years to help reduce risk even further.  Now because you have a ton of time to invest with, you may want to go with some higher risk investments.  If this is the case, you may want to look at some individual companies that are young and growing.  With proper research and good dollar placement, you can earn yourself a good amount above the average market returns.  I have a that shows some solid stock selection as well as a very few non solid stock selections.  The returns have been great and will give you something to consider when you start your own portfolio. The basic point is that if you are in your 20′s or 30′s, you will be able to be very aggressive and go for the high risk stocks.

How To Invest In The Stock Market If You Are In Your 40s Or 50s

How To Invest In The Stock Market AND GET RICHIf you are in your 40′s or 50′s, you are getting a late start, but you should be okay.  Having about 20 years of investing time is a good thing.  The one thing you want to be careful with is not investing in too risky of securities.  I would definitely suggest sticking to the E.T.F. I suggested up above.  This will give you the diversity you need and allow for some decent gains as you age into your sixties.  Let’s put it this way, if this system for investing is good enough for Warren Buffett, then I do believe it will be good enough for our needs.  He has basically told his people that when he wants his wife’s money placed in an E.T.F. to the S&P 500 in order for her to have solid investments going forward.
Being that you are closing in on retirement, you will want to constantly adjust your portfolio holdings into more low risk investments as you get closer to that final retirement day.  Markets have been known to have some major corrections of over 20% and this can wipe away years of savings in a very short time frame.  So it is of the utmost of importance to stay vigil when it comes to your portfolio and its well being.

How To Invest In The Stock Market If You Are In Your 60s Or 70s

How To Invest In The Stock Market AND GET RICHAt this point in your life, you will want to be investing in some very safe income stocks.  You are now at a point that y0u should be enjoying life.  There are some fantastic opportunities out there to secure this income that you need.  If you are still working during these years, you may be able to be a little bit more risky with your investments.  In saying this, what I mean is that you will be able to invest a little larger proportion of you investments in equities.  But you will definitely need to be wary of this approach.  I always think that when you are within 5 years of retirement, you will need to be mostly out of equities.  Your health is going to be playing a large part in how you invest during these years.  If you are unhealthy and cannot work no longer, then you will want to be ultra conservative with your investments.  If you have a few more good years of working left, then you can afford a bit more risk.  That will be a call you make when you are tired of working.  Knowing how to invest in the stock market will allow you this freedom.

How To Invest In The Stock Market For Any Age

I teach my students from day one to try to invest at least 10% of every paycheck into their stock portfolios.  If they do this from the beginning of their careers until they are in their 50′s to 60′s, they will have accumulated a huge amount of money.  This is one thing we can know for sure.  You are never too old to start investing and that is one thing you need to understand.  Nowadays, banks are paying about .1% interest on your savings account.  That is a whole $1 for every $1,000 you have in the savings account per year.  This is an absolutely horrible rate of return for your investment dollars.  The S&P 500 has returned an average of 8% over the last 10 years and that would 80 times more money back than what the banks are paying investors at this moment in time.  I just can’t see people leaving in a bank account at this rate of return and letting old man inflation eat the purchasing power away from it.  Do yourself a favor and be wise when it comes to your money.  You have worked to hard to just let it sit there and lose its value.

If you really don’t know how to invest, you can always watch how this pro does it.  He has been able to turn $1,000 into over a million!  You can watch his story here and he will even help you out if you are serious about investing.  It is all about knowing how to invest in the stock market.

How To Invest In The Stock Market AND GET RICH

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Notice: Any information that is written on this site is for educational purposes only. It should never be considered as financial or investing advice. Anything you read on this site is just informational and that is it. I am no longer a registered financial advisor and licensed by the SEC. I am now just a blogger who enjoys writing about stocks and making money online. You should always seek a professional financial advisor for advice on investing and any stock you are considering. Remember that investing is inherently risky and you could lose all of your money. I am also an affiliate of some of the items discussed on this site. In other words, I may be paid for people buying stuff off of this site and the links on here as well. This is how I am able to keep the site up and running.