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The Complete Beginner’s Guide To Investing (2020 Edition)

How do the ultra-wealthy get wealthy?

Do they know something you don’t know? Have they been doing it longer than you?

And — sweet mother of god — how do you get a piece of the action?

Making a lot of money is a great way to get your gusto back. When I asked Jordan Paris, the host of Growth Mindset University (one of the top personal development podcasts on iTunes), how people can get their gusto back, his answer surprised me…

“Make a lot of money. Money is an amplifier of who you really are. So when you make a lot of it, you gain the freedom to do what you want, be who you want, and live how you want. It creates freedom.”

But… is it possible?

Getting out of debt, becoming a millionaire, saving for retirement, and enjoying life right now? Can you achieve financial freedom?

Is it possible even though you make less money than you want and don’t understand a damn thing about investing?

Yes. It is.

And in this article, I’ve made my best effort to break down common, top-notch investing advice in a way that even a 5-year-old can understand (I’ll show you how to set up your IRA and/or 401k, screenshots and all).

Since this is an extensive resource, here’s a table of contents that will help you navigate where you want to go (however, if you’re new to investing, then I highly recommend at least scanning through the entire article).

Phase 1 – Mastering The Investor Mindset

Phase 2 – Outlining Your Ultra Tangible (and Shockingly Attainable) Financial Goals

Phase 3 – 7 Tips For Saving Money (Even If You’re Poor AF)

Intermission-Understanding The Atomic Power of Compound Interest

Phase 4 – Your Step-By-Step Guide to Investing in an IRA, 401k, Fixed Indexed Annuity, or REIT

My team and I created some goodies for those of you who are serious about saving, budgeting, and investing. Click here to claim your FREE investing and budgeting resources, which include…

  • FREE GUIDE: Find Out How a Millionaire Would Invest Your Money — We asked 5 expert investors what they would do if they had $100 per month to invest, $1,000 per month, or $50,000+. This is what they said.
  • Investment & Budgeting Spreadsheets — My team and I created a spreadsheet with three separate tabs that will help you budget day-to-day expenses, figure out how much money you need to retire, pay off debt, and start saving right away (I’ll walk you through filling out these spreadsheets in Phase 2 of this article).
  • Investment Opportunities Infographic — Are you a visual learner? This infographic includes easy-to-understand visuals and definitions for complicated jargon like “stocks,” “bonds,” and “index funds.”

I HIGHLY recommend downloading your FREE investing and budgeting package before diving into this article — you’ll need the spreadsheets to set your financial goals, determine how much money you need for retirement, and track your expenses.

Good to go?

Let’s jump into Phase 1 and tackle the limiting beliefs that are holding you back from building real wealth.

Note: As research for this article, I read I Will Teach You To Be Rich by Ramit Sethi, Rich Dad Poor Dad by Robert Kiyosaki, and Money: Master The Game by Tony Robbins. If you want to learn more about building wealth, I highly recommend each of those resources.

Phase 1 – Mastering The Investor Mindset

Here are 7 limiting beliefs that will keep you from investing your money, building true wealth, and creating the financial life of your dreams.

If you knock down these mental barriers, you’ve won half the battle of becoming a successful investor.

Limiting Belief #1: “Investing is only for those with disposable income.”

When I talk to people about investing in their future, one of the most common things I hear is, “I don’t have anything to invest. I’m barely making enough money as it is.”

But here’s the truth: money indicates priorities. It doesn’t matter how much money you make, you can invest. It might mean buying two fewer frappuccinos per week, ditching your gym membership, or getting a side-job (check out this article for jobs you can do from home to make an extra $1,000+ per month), but there is a way.

And you don’t need that much money to start investing at a profit and saving for your future (even a 15% return on $1,000 is $150 — that’s free money).

Limiting Belief #2: “I can’t afford it.”

We’ve all said this.

You see something you want — a piece of clothing, a car, a house, whatever… — and after looking at the price tag, you quickly dismiss it: “Ahh, I can’t afford that.”

This is nothing more than a limiting belief. In Rich Dad Poor Dad, Robert Kiyosaki explains that his biological dad, hard-working but always middle-class, would often say, “I can’t afford that.”

His mentor — or “rich dad” — on the other hand, avoided that phrase. If it was something he really wanted, then he would always ask, “How can I afford that?”

Saying “I can’t afford it” ends your internal dialogue — there’s no more thinking involved, that’s the end of the discussion. But asking “How can I afford that?” is far more empowering; it gets you thinking about what you could do, create, or sell in order to make the money necessary to afford that thing.

I’m not telling you to buy a ton of shit you don’t need, but I am recommending that you stop using “I can’t afford it” as an excuse to not buy things you really want… and so is Robert Kiyosaki.

Robert Kiyosaki Quote | Get Your Gusto Back

Limiting Belief #3: “Taxes aren’t a big deal.”

I’ve said this to myself a lot throughout my life. Not counting the last two years, I’d treated taxes as an inevitability, an unbeatable force.

Perhaps this famous mantra best illustrates the middle-class’s perception of taxes: “Only two things are guaranteed: death and taxes.”

But wealthy people do not treat taxes as an inevitability. Wealthy people use legal loopholes, they adjust location, finances, and business expenses to avoid paying as many taxes as possible. And before you start thinking that all those rich folk are nothing but tax-dodging crooks, consider what one of the most influential American judges of all time, Judge Hand, once said about the American responsibility to pay taxes:

“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the Treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.”

The only difference, then, between people who faithfully pay 20%-50% of their income to the government and those who don’t is the person’s understanding of tax laws and intentional restructuring of their finances to pay as little in taxes as possible.

We’ll talk about how to decrease your taxable income in Phase 3, but for now, suffice it to say that high taxes are not an inevitability (the fact that Amazon paid little to no income tax in 2018 — regardless of ethics — is not dumb luck, but a result of the company’s savvy accounting).

The better you learn to legally avoid paying taxes, the more money you can invest and the richer you’ll become.

Limiting Belief #4: “Profitable investments are far too risky for me.”

When most people think of investing in stocks, bonds, or real estate, the risk involved (or rather, the perceived risk) is overwhelming.

They think there’s a decent chance of losing all their money and they assume their money will be safe sitting in a savings account.

And sure a savings account is safe… but it’s also extremely unprofitable (the interest rate on most traditional savings accounts can’t even keep pace with inflation).

Fortunately, many investments that offer a 10%-15% compound return on your money are very low risk — a Roth IRA, 401k, and even many real estate trusts are examples of low-risk, reasonable-reward options. And diversifying your investment portfolio (which means spreading your money between multiple investments) further decreases your chances of taking a big loss.

We’ll discuss your investment options in detail in Phase 4, but for now, understand that investing is not nearly as risky as you probably think it is.

Tony Robbins Quote | Get Your Gusto Back

Limiting Belief #5: “My expenses should increase at the same rate my income increases.”

As a typical middle-class person makes more money, they spend more money.

Totally reasonable, right?

Not necessarily. If you want to finish saving for retirement in any reasonable amount of time, then when you make more money, you should save more money.

I’m not telling you to lead a penny-pinching existence, but you must understand the difference between liabilities and assets.

In the words of Robert Kiyosaki…

“An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket.”

The average person spends disposable income on liabilities — things that take money out of their pocket (going out to eat, expensive clothes, a nice car, a bigger house, etc). But the smart investor spends 10% or more of their income on assets — things that put money in their pocket without any additional work (stocks, bonds, real estate, etc).

By dedicating a percentage of your income to buying assets, you can build long-term wealth. However, this means that your spending on liabilities shouldn’t increase as your income increases — at least not at a ratio of $1 to $1. Instead, use a percentage of that disposable income to buy assets that will pay you back for years to come.

Robert Kyosaki Quote | Get Your Gusto Back

Limiting Belief #6: “I’m too bad at math to make profitable investments.”

What’s a 401k? What’s an IRA? What’s an index fund? What are stocks, bonds, or REIT’s?

What’s 4×12 to the 8th power?

Feel overwhelmed?

Me too.

Fortunately, you don’t have to be a math wiz to understand how to make profitable investments. Anyone, with a little bit of help, can understand the difference between stocks and bonds, index funds and mutual funds, IRA’s and 401k’s…

To prove it, in Phase 4, I’m going to explain these investment opportunities and break down all of those scary financial terms in a language any finance-phobe can understand.

Limiting Belief #7:  “There’s just not that much opportunity to invest.”

Any person who believes this will never be wealthy — they will never seek out investments, they will dismiss profitable opportunities as “too good to be true,” and they will miss out on building no-brainer riches that are available to anyone who pays a little attention.

If you believe that there’s no real, profitable opportunity for you to invest (no matter how low your income), it’s my hope that the remainder of this article will convince you that that isn’t true and that there is, in fact, as much opportunity as you wish there to be.

Stick with me and keep an open mind. Throughout the rest of this article, we’ll dive into the exact investment opportunities that prove this limiting belief wrong.

Phase 2 – Outlining Your Ultra Tangible (and Shockingly Attainable) Financial Goals

If genies were real, how many people would use at least one wish to get millions of dollars?

Me. You. Us. Them. Everyone.

We wouldn’t necessarily know why we want a lot of money, but most of us entertain a vague association that more money equals more happiness.

Of course, we only have to look at ultra-successful people who struggle with depression, anxiety, stress, or even suicidal tendencies to understand that “making a lot of money” isn’t all it’s cracked up to be.

Money is a tool — it’s not an end in itself. It’s something to be used and leveraged, but not worshipped.

Good thing, too, ‘cause you don’t need to be a millionaire or a billionaire in order to live the life of your dreams — shit, you might only need to make $75,000 per year.

It all depends on what your dream life is and how much money you’ll need to make it sustainable.

And I’m willing to bet that, once you outline what you want, your dream life is far more affordable than you think.

To prove it, I’m going to walk you through determining how much money you actually need to live the life of your dreams. But before going through this section, you’ll need to download the FREE investment package my team and I created for you — it includes the spreadsheets we’re going to use.

Download Your FREE Investment Package Before Going Through These Steps!

Step #1: Determine How Much Cash You Want in Your Back Pocket

Everyone needs money for a rainy day.

But exactly how much money do you want packed away, easy to access, in case you’re down on your luck?

A better question is, how much easy-access money do you need in order to feel safe and secure?

$10,000? $20,000? $100,000?

A good way to calculate this number is to figure out how much money you would need to live for 6 months if you lost all income.

Imagine knowing you had 6 month’s income worth of savings in your back pocket if things took a turn for the worst? Would feel pretty great, huh?

So… what is your amount of money you need to feel safe and secure? For now, put that number into your “My Investment Plan” spreadsheet. I’ll walk you through filling out the rest here shortly.

Investment Plan Spreadsheet | Get Your Gusto Back

Step #2: Determine How Much Money You Want for Retirement

Now we need to figure out how much money you need to retire. We can think of this as your “dream life” fund because the sooner you save this money, the sooner you can stop working and start spending your time on things that matter to you.

So here’s the question — how much money do you need to make per month in order to sustain the life you want to live?

But before you start throwing out random numbers (“a million dollars!”), let’s take a few minutes to do the math. Open your “Retirement Expenses” spreadsheet and, in the first column, write down the stuff that you’re going to want (a nice house, a new car, a boat, etc); include “expendable income” and “bills” within this column.

(Don’t be afraid to dream here — a lot of the things you want won’t be as expensive as you think)

Retirement Expenses Spreadsheet | Get Your Gusto Back

Now, in the “Annual Cost” column, write down how much each of those things is going to cost you per year (the “Monthly Cost” column will auto-calculate).

Here’s a mortgage payment calculator — just estimate the price of your dream house, the interest rate on your loan (at 30-years), and your down payment to figure out how much you’ll pay per month. Remember, though, that number changes drastically based on where you want to live.

(The goal here isn’t to get perfect numbers for each monthly expense, but to gain a more accurate understanding of how much your dream life will cost)

Here’s a car loan calculator — but don’t include this number if you’re planning to pay cash (you can also use that calculator to estimate the loan amount on a sailboat, jet skis, or other fun items you’ll want to get a loan for).

Make some educated guesses as to how much your monthly bills will cost and then enter your desired expendable income — that is, on top of all the other costs you’ll have, how much more money do you want to make?

Retirement Expenses Spreadsheet | Get Your Gusto Back

Now add up those numbers and calculate the total monthly cost of your dream retirement (our spreadsheet will auto-calculate these numbers for you).

Retirement Expenses Spreadsheet | Get Your Gusto Back

You’ll probably be surprised to find that your dream life doesn’t cost nearly as much as you thought it would. In the above example, I just need to make $154,000 per year in order to have a nice car, a sailboat, a $500,000 home, and $5,000 in monthly expendable income.

Pretty cool, huh?

The last step is to reverse-engineer that “Total Cost” to figure out how much money you would need in order to live off the interest, never work again, and have plenty to pass on to your children.

Assuming that I can re-invest my retirement funds for an 8% return (a pretty safe estimate), I would need $1.9 million to make $154,000 worth of interest every year. This number will auto-calculate in the spreadsheet we provided.

Retirement Expenses Spreadsheet | Get Your Gusto Back

I mean… that’s really not too bad. Sure, it’ll take some time to save $1.9 million, but keep this famous mantra in mind: “The best time to plant a tree was ten years ago. The next best time is now.”

In other words, the sooner you start saving, the sooner you reach your goals.

Step #3: Create a Plan For Paying Off Debt

If you don’t have any debt, then skip this step and move onto Step #4.

But if you’re like the average American, you have about $38,000 in personal debt, not counting your home mortgage.

Credit cards, student loans, and unprofitable investments can all help create an income-sucking debt monster that’s difficult to kill.

If your debt’s girth is getting seriously out of hand — say, 40% or more of your annual income — then work to pay at least 30% off before investing extra cash.

If your debt is manageable with your current income — that is, you have money to spare after your monthly loan payments — then I’d recommend putting some of your savings toward profitable investments and some of it toward paying off debt (if you save 20% of your monthly income, then you might put 10% toward investments and 10% toward paying off debt).

Just make sure that you pay off debt with the highest interest rate first — and if you’re able to pay more than the monthly minimum, make sure you call and specify that you want any extra money to go toward the principal, not toward interest.

In the “My Investment Plan” spreadsheet, enter your current amount of debt and the percentage of your monthly income that you’re going to put toward paying it off.

Investment Plan Spreadsheet | Get Your Gusto Back
As you track your debt, you’ll notice that how much you pay to your debt won’t line up with how much you have left to pay — that’s because of the interest on the loan. Whenever you can, pay extra cash toward the principal to pay off debt faster.

Step #4: Figure Out How to Fast-track Your Retirement

Ideally, you don’t want to wait until you’re 65 years old to be financially abundant. You’re young now. You’re physically capable now. No one knows what the future holds — the last thing you want to do is live a boring life and then die or become physically restricted before you even retire.

So… how do we speed up that process?

Well, there are really only two basic ways to hit your financial goals more quickly.

  1. Save more money.
  2. Get a better return on your money.

As for number two, I’ll show you in Phase 4 which investments will provide a safe and profitable return. Unfortunately, to get a much higher return, you’ll have to increase risk significantly (for most people, I’d recommend not doing that).

So that leaves us with option uno: saving more money.

If you want to hit your financial goals more quickly, then you need to save more money every month.

And there are only two ways to save more money…

  1. Increase your income but not your expenses.
  2. Decrease your spending.

That’s it.

If you’re looking at your financial goals and estimating that you won’t hit retirement until you’re damn-near dead (here’s a nifty retirement calculator), then get creative — how could you save more money every month? Could you increase your monthly income? Could you decrease your monthly spending? Could you get a different job, start side-hustling, or even flipping free stuff on Craigslist at a profit?

In Phase 3 (coming up!), I’ll give you some tips for saving money on a budget. But for now, remember that the only way to fast-track your retirement is to save more money every month. And to do that, you’ll need to get a little creative.

Note: Just because you won’t hit your financial goals within the next decade doesn’t mean you should settle for anything less than creating a life you love right now. For more info, check out this article I did that explains how to create a life that excites you.

Step #5: Calculate How Much You Need To Save Every Month and Start Saving RIGHT NOW

Now the rubber meets the road.

It’s time to determine, based on all the other work we’ve done in this section, what percentage of your income you should save every month.

Again, we can work the math backward.

Let’s assume that I need $1.8 million for retirement, I want to retire in 40 years, and I expect an average 10% annual return on my investments. In that case, I would only need to invest $3,700 per year, which is $308 per month.

But, in that scenario, time is on my side.

Let’s assume that I want to hit my goals faster and I want to get $1.8 million in just 20 years. Believe it or not, I would need to invest $2,500 per month.

With compound interest, time makes a big difference.

But… your situation is unique. Use this calculator to work the math backward and figure out how much money you’ll need to save every month to hit your financial goals.

And don’t get discouraged if you can’t save as much as you’d like. Save as much as you can right now and always seek out opportunities to earn more and save more.

Maybe you decide to save 10% of your income or maybe you decide to save 30% — whatever the case, getting started right now is the most important step to becoming wealthy and retiring sooner rather than later.

And as your income increases, so too should your savings.

In the “My Investment Plan” spreadsheet, enter your retirement savings goal (we calculated this number in Step #2) and the percent of your income that you’re going to dedicate to rainy-day savings and retirement every single month. Update this spreadsheet at least once per month.

Investment Plan Spreadsheet | Get Your Gusto Back

Phase 3 – 7 Tips For Saving Money (Even If You’re Poor AF)

When I’m talking with people about investing their money, this is probably the thing I hear the most…

I just don’t have money to invest.

I love you… but bullshit.

Your spending indicates your priorities — if you prioritize buying three frappuccinos every day, somehow, you’re able to make it happen. The same is true if you prioritize investing for your future…

You’ll make it happen.

So, for those of you who know how important it is to save for your future, here are some unusual (but crazy effective) tips for saving more every month… so you can invest more.

Tip #1: Create a Budget

I’ve never met a rich person without a budget.

In fact, the people I know who have millions of dollars are often far more intentional about accounting than my poor and middle-class friends. They want to know where every dollar goes.

You don’t need to become a stingy hard-ass, but you do need to create a budget and track your spending if you’re going to save consistently. Because if you don’t know where your money is going, then you can’t manage it.

Which is why my team created this kick-ass budgeting spreadsheet for you (download your FREE investment package to get a copy)

Budgeting Spreadsheet | Get Your Gusto Back

Just enter your expenses and the spreadsheet will auto-calculate how much you have leftover for savings. We recommend updating it once per week so you don’t get overwhelmed.

Tip #2: Ditch a Few Daily Liabilities

Remember when we talked about the difference between assets and liabilities and how rich people buy assets but poor people buy liabilities?

Now’s your chance to apply what you learned.

What do you buy every day or every week that you’d be willing to give up in order to save for your future? Maybe your gym membership? Your daily coffee? Your video games? Your eating habits?

I’m not telling you to stop spending money on things you love, I’m telling you to spend less on trivial things or even things you don’t really love so you can invest that money into your future.

If you’re willing to commit, set a resolution that you will only eat out twice per week, purchase one video game per quarter, or buy one coffee per day. Nothing happens without a commitment — write down your resolution on paper, show it to the fam, and stick it to your fridge.

Tip #3: Use a Saving & Budgeting App

Thanks to 21st-century technology and Apple’s famous marketing campaign — “There’s an app for that” — saving change, budgeting for the month, and even investing pennies is easier than it’s ever been before.

Acorns is an app that will round up to the nearest dollar for each of your purchases and invest the remaining change. I haven’t used this app myself but it seems to be getting some good street-cred — worth checking out.

Mint is another app that was recommended to me by a friend as I wrote this article. This app monitors how much you earn, how much you spend, and how much you have left (it even factors in your credit-card expenses).

There are a lot of other great money-saving apps on the market — here’s a list of 4 of the best from NerdWallet.

Tip #4: Use Rebates

Who doesn’t want free money?

Ha!

With Rakuten, you can sign up and get up to 40% cashback on your online purchases through stores like Amazon and Walmart.

This is a no-brainer way to save money.

Tip #5: Use a High-Yield Savings Account

There’s rarely a reason to keep your money in a traditional savings account. The interest rate can’t even keep up with the rate of inflation (which literally means you’re losing money every year).

Instead, put your rainy-day savings and any other short-term savings (wedding money, mortgage down-payment money, etc) in a high-yield savings account.

I use Synchrony, for example, an online bank with damn-near no fees and a 1.8% return on basic savings (which is wayyy better than most banks).

Tip #6: Reduce Taxable Income

For the rich and the poor alike, taxes are perhaps the largest income-decreasing invention on the planet.

I’m not saying that they’re good or bad — they just are. And the best thing you can do for your income is use as many legal loopholes as possible to avoid paying taxes. Move somewhere without state income tax (Texas, Washington, Alaska…), write off business or even side-hustle expenses, a portion of your medical costs, and/or open an S-Corp so you only have to pay normal tax bracket on your personal income and can have a lower tax rate on your shareholders distribution (here’s an article that explains the tax benefits of an S-Corp in more detail).

You can even contribute to a charity of your choice so that your money goes to something you care about, while simultaneously giving you tax breaks later on.

When tax day comes and every day before, you should be thinking: How can I save money? What deductions can I take advantage of? How can I arrange my situation so that I pay the least possible amount?

The less you pay in taxes, the more money you can save.

Tip #7: Move Somewhere Less Expensive

Why not consider moving somewhere with a low cost of living?

Sure — that might mean getting a new job (perhaps a remote job), selling your house, or even moving away from family, but if your income isn’t meeting your expenses, then it might be time for a change.

Here’s a list of 11 of the most affordable cities in the U.S.. If you’re even braver, you can move somewhere overseas that’s cheap (remember — cheap doesn’t always mean unsafe or scary). I lived in Romania for a month and Croatia for 3 months in 2018 and found those places delightful and affordable. I’ve also heard great things about Costa Rica.

Intermission: Understanding The Atomic Power of Compound Interest

Before you dive into Phase 5 of this article, it’s important to understand how compact interest works and why it will help you reach your financial goals.

Einstein famously said that “Compound interest is the 8th wonder of the world. He who understands it… earns it. He who doesn’t… pays it.”

Einstein Quote | Get Your Gusto Back

He meant what he said. In order to earn the massive dividends compound interest offers, you must understand how it works. And if you don’t understand how it works… well, you’re probably the one making the ultra-wealthy, wealthy.

So what is compound interest?

Perhaps it’s easiest explained with a silly example. Imagine that you put $1 into a magic money machine. This magic money machine always spits out double the money that you put into it. So you get back $2. But here’s the kicker — you have to wait an entire year to get that return. Then, since this machine is making you money, you put that $2 in and get $4 at the end of year 2. Then you reinvest the $4 and get $8. So on and so forth.

In other words…

  • End of year one: $2
  • End of year two: $4
  • End of year three: $8
  • End of year four: $16
  • End of year five: $32

After 20 years of reinvesting — starting with just $1 — how much money do you think you would have?

$10,000? $100,000?

Try $1,048,576. Yep — over a million dollars.

That’s compound interest — it’s exponential growth that expands upon itself, not just upon your original investment. In other words, your interest makes interest, not just your principle investment.

The example I gave you above is with a 100% return on your money, which is practically impossible to get in the real world. But still, Just look at the profit difference between a 7% return on your money with compound interest vs. without compound interest.

Compound Interest | Get Your Gusto Back

(Image Source)

As a more real-world example, I’ve invested $10,000 into my own Roth IRA this year, and that money has returned $1,523 in cold, hard profit (about a 15% return).

Vanguard Screenshot | Get Your Gusto Back

That’s free money — and the more my account grows, the more money that 15% becomes (return rate fluctuates, of course).

There’s a common phrase among investors about the power of compound interest and making smart investments: “I don’t work for money. I make money work for me.”

In Rich Dad Poor Dad, Robert Kiyosaki recommends that when you invest, you treat every dollar as an employee that can work 24/7 to grow your financial portfolio. Rather than trading your time for money, you’re trading money for more money.

Simple as that.

Now, I’ll show you how to get compound interest using a Roth IRA, Roth 401k, REIT, or Fixed Indexed Annuity.

Phase 4 – Your Step-By-Step Guide to Investing in a Roth IRA, 401k, Fixed Indexed Annuity, or REIT

This is an exciting phase.

I’m going to show you how to get that crazy compound interest you just learned about and, more specifically, how to invest your money to hit the retirement goals you outlined in Phase 2.

You’ll learn how to set up a Roth IRA, Roth 401k, REIT, and Fixed Indexed Annuity in as little as 10 minutes.

(But don’t get jargon-whiplashed. We’re going to keep things super simple.)

A quick note about diversifying your investments

Every book I’ve read on investing emphasises the importance of diversifying your portfolio. Basically, that just means putting your investments in different places so that if one fails, the others are unaffected. Don’t worry about this if you’re just starting to make investments, but as your income increases, max out your IRA and then invest in some real estate or a 401k to split up the risk.

To help you with any acronym-dyslexia you might experience throughout this section, my team and I created this investment comparison spreadsheet.

Investment Comparisons Chart | Get Your Gusto Back

You can click here to create a fresh copy of this chart in a new tab for your reference.

Ultimately, if your employer offers a 401k, then start there. If you’re self-employed, then start with the Roth IRA. If you have additional funds after maxing out a Roth IRA and/or 401k, then consider checking out the REIT or Fixed Indexed Annuity options.

Without further ado, let’s put your retirement funds to work.

How to Set Up Your Roth IRA

If you don’t have one already, I highly recommend getting a Roth IRA. This is a stocks-and-bonds investment fund that you pay taxes on upfront — which means when retirement day comes, you won’t have to pay a huge chunk of money to the government, it’ll all be yours.

Usually, that’s a good deal, because most people’s income (and thus tax bracket) increases as they get older, so it’s better to pay less taxes now than it is to pay more taxes later.

What Are Stocks? | Get Your Gusto Back

A well-balanced investment fund doesn’t just buy stocks or bonds, but a little of both — as a way to manage risk, many investors will purchase more stock and fewer bonds when they’re young (since they have time on their side), but less stock and more bonds when they’re getting close to retirement (which is safer).

What are bonds? | Get Your Gusto Back

When you do get a Roth IRA, I highly recommend using an index fund, not an actively managed mutual fund.

Index Funds vs. Mutual Funds | Get Your Gusto Back

This is something that’s been repeated in every investment book I’ve read. And the reasons are pretty simple…

  1. 96% of actively managed mutual funds fail to beat the market (because no one knows where the market is going — this is something savvy investors firmly agree upon). And the 4% of brokers that do beat the market… it’s a different 4% the next time around (i.e. It’s sheer dumb luck).
  2. Index fund fees are wicked-low and near non-existent while actively managed fees can cost up to 50% of your principal investment.
  3. From 1993 to 2013, the S&P 500 (a particularly famous index fund) returned an average 9.28% while the average mutual fund investor made just over 2.54% return.

Index Funds Chart | Get Your Gusto Back

(Image Source)

Here’s how you can set up your Roth IRA index fund…

Go to Vanguard — my personal favorite investment website which serves 30 million investors and specializes in index funds. Click on “IRAs: Roth & Traditional.”

Vanguard Screenshot | Get Your Gusto Back

Click on “Open your IRA today.”

Vanguard Screenshot | Get Your Gusto Back

The rest is dead-simple — follow the prompts and fill out their application. You’ll receive a confirmation email within a few days. Then you’ll just need to link your bank account to your Vanguard account, which will allow you to deposit (and even automate) monthly payments toward your Roth IRA. Easy as pie.

How to Set Up Your Roth 401k

If you have a full-time job at a big corporation, then you might already have a 401k, and the company might even match your own contributions — if you’re not sure, definitely ask your boss about this.

In that case, I recommend taking as much advantage of that matching contribution as possible — it’s free money!

If you’re self-employed, though, then you can set up a Roth 401k through Vanguard. Go here, scroll down, and click the link shown in the screenshot below.

Vanguard Screenshot | Get Your Gusto Back

Log in (or create an account if you haven’t already) and then fill out the application. You’ll receive a confirmation in a few days and can start contributing after you link your bank account.

How to Invest in a Trustworthy and Profitable REIT

What are Real Estate Investment Trusts? | Get Your Gusto Back

A real estate investment trust is simply a business that manages cash-flowing real estate, one that you can loan money at a healthy interest rate.

If you Google “Best real estate investment trusts,” you can research profitable options until your ears bleed.

According to the research I’ve done, Realty Income and Boston Properties are long-standing, trustworthy, good-return companies.

(If you want to own real estate yourself without any of the work, then you might check out Memphis Investment Properties — I personally know and trust the people behind this company)

To invest with Realty Income, go here and get set up with Transfer Agent to start purchasing stocks.

REIT Options | Get Your Gusto Back

To invest with Boston Properties — or buy most any stocks for that matter — you’ll need to sign up with a commission-free online brokerage (like E-Trade), then search for “Boston Properties (NYSE:BXP)” and purchase as many stocks as your heart desires.

Make sure that the REIT you invest in has been around for a long-time and is well trusted by other investors — that’ll give your money the best chance of pulling a promising return.

How To Invest in a Fixed Indexed Annuity

What is a Fixed Indexed Annuity? | Get Your Gusto Back

Essentially, a fixed index annuity allows you to invest without risking your principal, but you still get to participate in a percentage of the market’s positive growth. Most fixed indexed annuities also offer guaranteed lifetime income as a return on your investment.

But remember, a fixed indexed annuity is only as trustworthy as the institution making the promise. Charles Schwab is an example of a bank that has been around for eons, is trustworthy, and has a fixed index annuity option. If you’re interested, then I highly recommend contacting one of Charles Schwab’s annuity experts to ask questions (phone number is 866-663-5241).

BONUS: Claim Your FREE Investment & Budgeting Package!

This free bundle of resources includes…

  • FREE GUIDE: Find Out How a Millionaire Would Invest Your Money — We asked 5 expert investors what they would do if they had $100 per month to invest, $1,000 per month, or $50,000+. This is what they said.
  • Investment & Budgeting Spreadsheets — My team and I created a spreadsheet with three separate tabs that will help you budget day-to-day expenses, figure out how much money you need to retire, pay off debt, and start saving right away (I walk you through filling out these spreadsheets in Phase 4 of this article).
  • Investment Opportunities Infographic — Are you a visual learner? This infographic includes easy-to-understand visuals and definitions for complicated jargon like “stocks,” “bonds,” and “index funds.”

Conclusion

You’ve come a long way.

You started this article knowing very little about how the ultra-wealthy get wealthy. But now you know how compound interest works, why investing is important, and even how to open a Roth IRA, 401k, Fixed Indexed Annuity, or REIT.

Heck — you even know how an expert would invest your money.

And if you follow the principles within this article, it’s only a matter of time until you make enough money to retire, live your dream life, make a meaningful impact, or escape the rat race.

Of course, it’ll take some time to get your income to where you want it to be.

But I’ll leave you with this quote from Earl Nightingale…

“Don’t let the fear of the time it will take to accomplish something stand in the way of your doing it. The time will pass anyway; we might just as well put that passing time to the best possible use.”


Mike Blankenship

Mike is a writer for SUCCESS, AdWeek, and Addicted2Success. He’s been quoted on Forbes and Entrepreneur for his expertise in marketing and personal development. He’s also the owner of Get Your Gusto Back where he helps people reignite their inner fire.

2 thoughts on “The Complete Beginner’s Guide To Investing (2020 Edition)”

  1. Hey Mike, thank you for this great posts. With this step by step guide it’s much easier to start getting financial free. As I started reading I couldn’t stop.

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