3006: Invest Overview - Fueling Your Net Worth by ESI Money on How to Build Wealth Through Investing

[00:00:00] This is Optimal Finance Daily, Invest Overview, Fueling Your Net Worth by ESI of ESIMoney.com Let's discuss the third step to wealth, the I in ESI Money. As noted in the explanation of the site's meeting, the I stands for invest. And just to keep everyone up to speed, earn and save are the other two.

[00:00:25] Investing is the step that supercharges your net worth and opens the door to high levels of wealth. It does this by taking the cash flow generated by the first two steps and growing it to astounding levels over time. You've probably heard the phrase, money making money, right? This is the point where that happens. The money you save and invest starts to earn money itself. Keys to Investment Success

[00:00:52] There are many investing decisions to make to be sure your money works the way you want it to. But regardless of which path you choose, there are three factors that drive overall investment success. They are, number one, amount invested or how much you save and put into investments. The more you invest, the faster your net worth is likely to grow. Personally, I try to save a good chunk each year so as much of my money is working as possible.

[00:01:22] Number two, time invested or how long your money is invested. The longer your money has to work, the more it can grow. This can become a very significant part of your net worth growth, especially after 20 to 30 years of investing. Time is the best way to maximize your investment return because your money starts to make money. And then that money starts making money. And then that money starts making money. And on and on.

[00:01:49] The cycle repeats itself year after year, decade after decade, until your investments have grown many times over. This is one of my secrets to success. Invest early, invest often and let your money grow. And number three, rate of return or the annual growth rate of your investments. Higher is better, of course, but also comes with more risk. The risk that you could lose money. So it's a balance.

[00:02:15] I prefer a good, not great return with lower levels of risk. Stages of investing. There are many investment choices, including stocks, bonds, mutual funds, real estate, commodities, and much more. We'll discuss most of these at some point. But for now, all you need to know is that your life stage will probably determine what investments you select. Early in your life, it's likely you'll focus on growth.

[00:02:43] This is simply investing so your money grows in value, like buying a stock and seeing the price increase. Stocks are well suited for this stage and are the choice used by most people to grow the value of their investments. As you age and transition into retirement, or at least slow down, you'll move to a more conservative investment strategy to preserve your money. At this time, you'll want a reasonable combination of growth, income, and withdrawal to make sure your money lasts longer than you do.

[00:03:12] How I've invested. The summary mentioned mirrors how I've invested so far. Here are a few more details to be specific. Index funds. I have invested in index funds for decades to grow my investments. I currently use three primary index funds. Vanguard Total Stock Market Index Admiral, or VTSAX.

[00:03:37] Vanguard Total Bond Market Index Admiral, or VBTLX. And Vanguard Total International Stock Index Admiral, or VTIAX. I'll talk about why I prefer index funds and use Vanguard in a later post. But these have served me well through the years, and helped grow my net worth to levels far beyond where my income alone could have taken it. Real Estate.

[00:04:04] As I've started to look at retirement strategies, I'm investing in more income-producing assets. A few years ago, I started investing in real estate. It's been a very successful effort, and my rental units now make up the majority of our retirement income. Other Income Investments. I've tested other income-producing investments, including peer-to-peer investing, which hasn't worked out well, as well as dividend investing. Nothing really to write home about so far, though.

[00:04:34] Needless to say, investing is a vital part of growing your net worth. Done incorrectly, and it won't help you much at all. Done well, and your net worth will shoot to the moon. How they all relate. To wrap up the last three posts where I've shared the details behind the ESI name, let's look at how they all work together. E. Earn as much as possible. Your career is the best way to do this, but there are other options as well.

[00:05:02] S. Save as much as possible. Save when you spend, control your spending, and set aside all you can. I. Invest to grow your wealth. Take your savings and put it into investments that will grow and grow and grow. There you have them. Three simple steps to wealth. You just listened to the post titled,

[00:05:30] Invest Overview Fueling Your Net Worth by ESI of ESIMoney.com. You sign up for something, forget about it after the trial period ends, then you're charged month after month after month. The subscriptions are there, but you're not using them. In fact, I just learned that 85% of people have at least one paid subscription going unused each month.

[00:05:53] Thanks to Rocket Money, you can see all of your subscriptions in one place and cancel the ones you're not using anymore, saving more money. Rocket Money is a personal finance app that helps find and cancel your unwanted subscriptions, monitors your spending, and helps lower your bills so you can grow your savings. The app automatically scans your bills to find savings opportunities and will even negotiate with service providers on your behalf. No more waiting on hold.

[00:06:20] And their new goals feature makes saving automatic perfect for building an emergency fund or saving for a house. Cancel your unwanted subscriptions and reach your financial goals faster with Rocket Money. Go to rocketmoney.com slash OFD today. That's rocketmoney.com slash OFD. Rocketmoney.com slash OFD. I thought this was a great overview on why investing is so important and some key points on how to get started.

[00:06:49] The questions I see most often about investing is what kind of account to open and then which specific investments to choose. While each person is different, I think in general, a great place to start investing are with tax-advantaged retirement vehicles. Things like a 401k, traditional or Roth IRA, and HSA, which is a health savings account. I chose to fully fund these before I started investing in an after-tax brokerage.

[00:07:18] The reason is because the tax advantages that come with these retirement vehicles allow your money to work harder for you. There are also annual contribution limits to these accounts. And if you don't take advantage of them by contributing each year, you won't be able to contribute later to make up for lost time. I like to think of these four different accounts, my 401k, IRA, HSA, and after-tax brokerage as the different buckets where I'm holding and investing my money.

[00:07:47] But the water within each bucket is the specific investments I'm choosing, which for me is going to be index funds. And I've simplified my investment strategy by choosing basically the same investments across all my accounts. So the buckets are different, but the water is the same. I'm with ESI on this one and opted for VTSAX, which is Vanguard's total market index fund.

[00:08:12] If you'd like to learn more why VTSAX is so popular within the financial independence community, I suggest you read The Simple Path to Wealth by JL Collins. This book is so popular because it really demystifies investing in a way that's very easy to understand. And that should do it for today. Have a happy rest of your day and I'll see you on the Thursday show tomorrow, where your optimal life awaits.