How to Become a. Killer Investor. By Alanya Kolberg. Bottom Up Wealth

Size: px

Start display at page:

Download "How to Become a. Killer Investor. By Alanya Kolberg. Bottom Up Wealth"

Cory George
5 years ago
Views:

1 How to Become a Killer Investor By Alanya Kolberg Bottom Up Wealth Did you know it s actually pretty easy to become a millionaire? An 18 year old can invest less than $20 a week and get average returns, and reach millionaire status by age 65. But how many people actually do this? How many people know how simple it is to do? Answer: Not nearly enough. But here you are, ready to get started. After opening a brokerage account or retirement account, you may open it expectantly, eager to see how much money you've made. Opening your Roth IRA or other investment account is just the first step! In order to make money from your investments, you must actually buy your investments. Which stocks should I buy? is probably your next question. Slow down there, Buddy. What you should invest in depends upon your goals, your tolerance for risk, which strategies you feel comfortable with, and how much money you have to get started. What I can tell you now is that you are going to have a difficult time in the stock market if you don t get some foundational knowledge and map a path to success. I learned the information in this guide from scratch. I did not have a teacher or guru to follow. Some of these were very expensive lessons that I was taught the hard way. Today is your lucky day, because I'm going to tell you where to start on your journey to wealth so you don't lose your ass in the stock market. 1

2 Strategy Repeat after me: I need a strategy. Again! I NEED A STRATEGY! You simply will not be successful if you just run around buying whatever you heard was a great stock pick. You don't know if you re getting it at a good price, you don t know how long to hang on to it, and you don t know what you need to be monitoring to know when it s time to cut your losses. There are many strategies to choose from; some are pretty straightforward, some are complex, and some are a blend of different strategies, but you need one, especially when you're just starting out. It's fine to utilize more than one, but when you're a newbie, choose one that you think you can get a handle on, and study the hell out of it. Become an expert in that particular strategy. As for me, I'm not a day trader. I ve become pretty good at what I do, which is long term investing with a blend of long term strategies. A few years ago I got a little full of myself and thought I'd make some fast money trading in and out of low-quality stocks. Yeah, no. We don't talk about that unfortunate week when I was forced to sheepishly hand my behind to Mr. Market. One day, I'll learn it well, and give it another go, but for now I'll just admit that I deserved what I got looking for a quick buck. Do some research. Set some goals. Figure out what you re comfortable with. You must choose a strategy. Without one, you'll be trading too much, paying too many fees, selling too low, buying too high, and using emotion rather than common sense to place your trades. Patience Now, unless you are day trading and you're pretty good at it (and please don't kid yourself, because most people lose money), investments are not substantially profitable overnight. Dividends 2

3 agonizingly dribble in, stocks go up, stocks go down, and sometimes stocks are in freefall. If you re unfamiliar with the market, you may watch the value of your holdings tank with horror. You cannot panic. You should research, yes. You should check the company's fundamentals, yes. You should maybe (probably, if all looks good during your research) actually be buying. What you can't do is freak out and sell your companies at the bottom. This is losing money and is not what we re here for. When strong companies come down, they go back up. If you do sell at the bottom, please understand that I am on the other side of Internet Land, buying all your discarded but still perfectly good shares at a huge discount. I'm probably laughing like a madman as I click BUY. Full disclosure. Discipline Once you've got your strategy nailed down, it's imperative that you stick to it. Once you find a little success investing, it's easy to begin to feel greedy. You can't succumb to shiny object syndrome. You may feel tempted to grab a hot stock or sell your investments to spend. I have had so many other investors laugh and point at my boring, slow wealth building strategy, and tell me how much money they made playing hard and fast, and ask me why I work so hard when I don t get immediate gratification from my methods. After my disaster foray in day trading, I decided to stick with what I know delivers profits year after year. Guess what? Years later, those same people want to know my secrets to success. Start 10 years ago when I told you to, is my answer, because long term investing success takes time. It's a shame but you cannot make up those years you were off messing around losing money (nor can you get a refund). When you're looking for quick profits, greed will begin to cloud your judgement, and you will make costly mistakes. I've seen it time and 3

4 time again, and have made them myself. Learn from my errors: calculated and consistent is the winner in this game. Capital Everyone's heard some story of some guy making a killing in the market after investing just $100. This is rare and you should not expect this to happen to you. Investing takes strategy, patience, discipline, and money to invest. I'm not saying you need to already be wealthy to invest; in fact, that's a common misconception that I'm always working to correct. Regular people can build wealth through investments. I'm proud to tell people that I went from a single mother on welfare to this strange woman online sharing her investing success with you. This part about having capital is more about discipline (as previously discussed) than having a big chunk of money to invest right now. Once I discovered investing and watched my money working, I was mesmerized. I could not believe I was able to scrape some money together, stick it somewhere, and watch it not only grow through capital appreciation, but actually spit more money back at me in the form of dividends, all for doing nothing but some research ahead of time. It was like magic. Why hadn't anyone ever told me this?? I became a bit obsessed with this practice of scraping money together to watch it grow. I was poor. There wasn t much to scrape. But I did, consistently, and looked for any spare $5 I could throw in my account. This is a big part of my success as an investor: making saving a priority, then putting that savings to work. 4

5 You can do this now, even if you haven t chosen a strategy or have no idea what you're doing at all. Open your Roth IRA, and contribute to it regularly. Once you ve learned the ropes, trust me, you ll be glad you started early. Check out 10 Steps to Start Investing if you haven t yet! Dividends If you aren't familiar with dividends, they're the money a company pays you as a shareholder. This is they way they distribute profits. While dividends are just icing on the cake for some investors, they are my bread and butter. I think of dividend stocks as geese laying golden eggs. I don't sell my geese. You can pry my geese out of my cold, dead hands, then hand them to my children as you lower me into the ground. 5

I love dividends because when you own shares of companies that rise in value, the only way you can redeem your profits is when you sell your shares. The profit from this is called a capital gain.

6 I love dividends because when you own shares of companies that rise in value, the only way you can redeem your profits is when you sell your shares. The profit from this is called a capital gain. When you receive dividends, the company just keeps paying you over and over and over, year in and year out, for as long as you're a shareholder. You can keep your shares and still get paid. When a share price is down, dividends serve as a nice consolation prize, because even if your shares value is down 10%, your dividend is likely to stay the same rate. This is an excellent time to be reinvesting your dividends, because when share price is low but dividends paid remain constant, you re getting more shares for your money. Dividends are also a good gauge of success in a company. If a company decides to cut a dividend or stop paying it, it's time to consider dumping the stock. The strongest of companies do everything in their power to never cut or discontinue dividends if they're already paying them. If they are cut, share price is very likely to 6

tank and may not recover. Discontinuation of dividends is also a pretty good indicator that the company s financials are in trouble and it s time to get out anyway.

7 tank and may not recover. Discontinuation of dividends is also a pretty good indicator that the company s financials are in trouble and it s time to get out anyway. Dividend Growth If dividends are icing on the cake, dividend growth is the cherry and then a bunch of amazing caramel and hot fudge drizzled all over it. Not only do some companies pay consistent dividends, but some raise their dividends every single year, have for decades, and show no signs of stopping any time soon. These raises are about as sure as my grandma typing Amen on the picture of the child with the piece of ham on her face on Facebook (you know the one). Being paid a consistent dividend is amazing, but being paid one and knowing you ll be getting a raise every year just makes me want to do a little dance. Dividend growth rates vary from year to year and from company to company, but many companies aim to raise the cash they send to their shareholders by at least the rate of inflation. 7

Dividend Reinvestment If you've read anything I've ever written on investments, you know I love me some dividend reinvestment. Investing is rarely free.

8 Dividend Reinvestment If you've read anything I've ever written on investments, you know I love me some dividend reinvestment. Investing is rarely free. You either pay commissions or a load when you buy, or you may pay an expense ratio, or perhaps all of the above. I pay a flat commission fee when I buy. Reinvesting your dividends is usually free, and if you know a lick about who I am as a person, you know free is my favorite word. Not only is reinvesting dividends generally free, but it turns your Investment Returns to Investment Returns On Steroids. Every time the company you own pays you your profits, if you opt to have your dividends reinvested, your income gets funneled right back into the machine that generated them. This means bigger returns, faster. Look here: 8

More magic. When you set your date to retire early a few years into the future, reinvesting your dividends ramps up your income much more quickly than taking them in cash.

9 More magic. When you set your date to retire early a few years into the future, reinvesting your dividends ramps up your income much more quickly than taking them in cash. Tax efficiency People act like I'm crazy when I tell them it's imperative they open a Roth IRA. These strategies I'm sharing with you are not get rich quick schemes. They are slow and sure wealth building activities. If you have nothing saved for retirement, you need to head over to 10 Reasons You'll Be Working Until You Die and pop back over here after your Roth IRA is up and running. You have no business investing for current income if you're headed towards a diet of cat food in retirement. The wealthy stay that way utilizing many methods, and tax optimization is high on that list of methods. 9

Roth IRAs are beautiful. Unlike 401ks and traditional IRAs, you get no tax break on what you contribute now. But after I'm done with you, and you re in a way higher tax bracket?

10 Roth IRAs are beautiful. Unlike 401ks and traditional IRAs, you get no tax break on what you contribute now. But after I'm done with you, and you re in a way higher tax bracket? You'll be thrilled for the tax relief a Roth IRA offers you, because you pay no tax on your earnings in a Roth. Look at the difference between using a traditional brokerage account, Traditional IRA, and a Roth IRA for your long term investments: When your investments go from sad to successful, Uncle Sam will be sniffing around for some of it. Protect yourself now with the tools that are available to you. Fees These drive me crazy. I outperform my husband s 401k every year, yet we still have to pay the crooked fund managers an enormous piece of 10

11 our retirement fund that is held in this account. If it weren't for that (stingy 50%) match he gets, we would not use his 401k at all. These fees are not just in your 401k. Any fund you're investing in has a fee and is reducing your return. If you re using Robin Hood, Stash, or Acorns, you re paying a bunch of fees. Go look. I'll wait. This is so important: educate yourself as to which companies are profitable and take care of their shareholders, and invest in those companies. Skip the funds, unless you have absolutely no desire to learn this information that is worth hundreds of thousands of dollars, maybe even millions. Mutual funds will produce mediocre returns and expense ratios will kill your nest egg. Period. These fund managers sometimes just trade in and out of holdings because it earns them more commissions. Not only are you paying an expense ratio but you probably paid trading fees and possible a load fee just for them to hold your money. It s estimated that all told, the average mutual fund costs an investor a compounded 3.52% in fees, every year, and even more (4.52%) if the fund is held in a taxable brokerage account. This adds up to an enormous amount of money. I m hot just thinking about all these fees. You need to look into what your investments are costing you. 11

You do not have to invest in the entire S&P 500 to be profitable. Just the best part is the way to go. The Bottom Line As you can see, this whole, What stocks should I buy?

12 You do not have to invest in the entire S&P 500 to be profitable. Just the best part is the way to go. The Bottom Line As you can see, this whole, What stocks should I buy? question is getting way ahead of yourself. While you can get better and better in your stock selection, it can be a lot of trial, error, learning the hard way, and sometimes luck. However, these 9 principles, once you learn them and have them mastered, are literally money in the bank. Get to know these first, and you ll be ready for successful investing! More resources: Online Course: Learn how to find, analyze, buy and maximize profitable stocks 12

How to Become Rich Using just $10 Monthly!

How to Become Rich Using just $10 Monthly! Read it and... 1 - Learn How To Become very Successful and Rich! Give it away and... 2 - Watch How it Becomes Your own Personal Recruiting Machine! Give it away