Simplifyng your investment strategy is an ongoing process. It takes time to perfect. I am not even close to perfecting investment strategy, partly because I just started investing last year. But, I will reveal with you my thoughts on how I want to start investing for the next ten to twenty years. My stratey involves a retirement account and real estate investment.
Retirement Account (75% of investment strategy): Right now, I am contributing the maximum amount to my 401(k) that gives me the maximum matching contribution from my company. I put in 6% of my income and receive an additional 3% in additional contributions from my company. If your company has a 401(k) plan with a matching contribution benefit, DO NOT pass it up. It is free money, and you cannot pass up free money if you want to become wealthy. You can choose to either have a 401(k), an IRA, or both. I’m going to keep my 401(k) and soon open up a Roth IRA, because I do not like the limited amount of investment choices in my 401(k). In your retirement account, if you are under 40 years old, I invest in growth stock mutual funds and index funds. If you are over 40 years old, you may want to be a little more conservative with your investments, but you can still pick large cap growth stock funds and index funds. You may want to throw in a high-yield bond fund or a growth fund that pays dividends.
Real Estate Investing (25% of investment strategy): I will eventually build up a real estate portfolio, but I am going to do it the unconventional way. I will pay cash for my real estate, so the cash flow will be 100%, less maintenance and tax expenses. It’s the only sure-fire to win with real estate. When you buy a real estate investment property with no money down and expect to hold it for the appreciation, you could lose your shirt.
The Single Most Simplified Investment Strategy:
- Open up a Roth IRA
- Buy 3 Index Funds and 3 Large-Cap Growth Stock Mutual Funds
- Systematically invest 15% of your paycheck to the account.
- Don’t touch the account for at least 20 to 30 years!