Investment Strategies For Beginners

Why do we love index funds? Here are 4 reasons to consider: They are simply practical for most investors. But they have areas no one should overlook: → Diversification Because these funds are essentially a basket of multiple securities, you spread out the risk by not overconcentrating into one individual stock or bond. → Costs Since it merely mirrors an index, no portfolio manager buys and sells actively behind the scenes. Therefore, there is a low expense ratio attached to it. As your portfolio increases, these costs make a massive difference! → Tax Efficiency Because there is less buying and selling inside of the fund (low turnover ratio), there are fewer tax transactions being created. As a result, your tax bill is significantly cut compared to a standard mutual fund. → Performance Most active fund managers have underperformed their benchmarks over the last 20 years. So, while you might be getting "average" returns of the benchmarks, your chances of underperforming markets are reduced since you are mirroring those same markets! Overall, while everyone's situation is different, and many investment choices should be considered, index funds are an excellent choice for average investors looking for a practical way to build wealth. Index and chill.

Stock Picking vs. Index Investing: A Strategic Perspective 📊 Each year, S&P Dow Jones Indices conducts a study on active versus passive management, and the findings are eye-opening. Last year’s study revealed that after ten years, 85% of large-cap funds underperformed the S&P 500, and after 15 years, this figure rose to nearly 92%. This begs the question: why invest in single stocks? Today, the allure of investing in single stocks is overshadowed by the practicality and efficiency of index funds. With ETFs tracking indexes available for less than 15 basis points, the data overwhelmingly favors passive management, particularly for retail investors. Despite this, tales of striking it rich on a single stock persist, much like the allure of casinos and lotteries. But is this a sound strategy for long-term investment success? I’m sure you know the answer, and some of you have felt the frustration of investing in single stocks. Why Lean Towards Index Funds? Beyond performance, index funds offer significant tax advantages. Consider this scenario: Actively Managed Portfolio: Imagine a portfolio that achieves a 10% annual return. If about 30% of the stocks are sold each year, and you're subject to a 20% capital gains tax, the tax drag reduces your effective returns. Frequent trading in active management can lead to higher capital gains taxes each year. Index Fund: In contrast, a similar index fund would incur far fewer sales, resulting in lower capital gains taxes. Most index funds have lower turnover rates, meaning you're less likely to owe capital gains taxes annually. This tax efficiency can significantly affect your net returns over time. The Case for a Strategic Approach: Rather than falling into the stock-picking trap, investors should consider aligning their investment strategy with their life goals. A strategic approach to investing involves a diversified portfolio tailored to your risk tolerance, financial objectives, and timeline. It mitigates the risks associated with single-stock investments and capitalizes on the broader market's growth. This approach also allows for adjustments as your life circumstances and goals evolve, ensuring your investments align with your financial roadmap. Investing isn’t just about chasing the highest returns; it's about crafting a strategy that supports your financial well-being over the long term. You can confidently navigate the market's ups and downs by focusing on a diversified, goal-oriented portfolio. #finance #investing

Investor Alert: Beware of Social Media 'Investment Group' Imposter Scams FINRA has seen a recent significant rise in investor complaints due to fraudulent "investment groups" promoted across social media. #Scammers pose as registered investment advisers, advertising "stock investment groups" on platforms like Instagram, later shifting to encrypted group chats on WhatsApp to pitch investments. Since November, FINRA has received numerous investor complaints, alleging losses totaling millions of dollars. Sadly, this might be just the beginning. These imposters falsely portray themselves as registered professionals, often fraudulently claiming ties to well-known public figures and respected figures in the investment industry. Scammers lure in investors by initially promoting investment in actively traded stocks, and then steer them into low-priced, low-volume U.S.- or Hong Kong-listed stocks, potentially causing significant losses. They coerce victims into opening accounts at specific broker-dealers and manipulate the price of securities, leaving investors unable to sell, eventually causing the value to plummet. To guard against these scams, be cautious of unsolicited investment messages and conduct thorough research into investment professionals before committing. Utilize FINRA BrokerCheck (brokercheck[.]finra[.]org) to verify credentials, and refrain from investing without independent evaluation. It's crucial to remain vigilant against these and similar fraudulent activities. #financialadvisors and #RIAs, if you're reading this, consider passing along these best practices to your clients to help ensure their financial security. If you believe you've been targeted by a stock manipulation scheme, submit a regulatory tip to FINRA. #InvestorProtection #FinancialSecurity https://lnkd.in/eWreqyqm

How to Achieve Guaranteed Failure as an Investor: While everybody talks about wanting to be successful, I want to take Charlie Munger's approach of "inverting" in this post. Failure is the Inversion of Success. The necessary condition to being successful is to not be a failure. Especially when it comes to investing and smartly managing your money, knowing how not to fail can also help with risk management Below are the 7 personality types that guarantee failure. [I have also been complicit in exhibiting these traits in all honesty]: 1. Impatient Ishan – Ishan wants quick returns and jumps from one investment to another, chasing the next hot trend, unable to see the long-term picture. Lesson: Real wealth compounds slowly. Patience is the most profitable investing trait. 2. Greedy Gaurav – Always chasing the highest returns, Gaurav's constant desire for more money causes him to take unnecessary risks which can inevitably blow up his portfolio. Lesson: as Morgan Housel says, the hardest financial skill is getting the goalpost to stop moving. Recognize when enough is enough. 3. Egoistic Esha – Esha believess he's smarter than everyone else and refuses to acknowledge her mistakes, doubling down even when he's clearly wrong. Lesson: Great investors admit mistakes quickly, learn from them, and move on without ego. 4. FOMO Farhan – many people invest in certain stocks because everyone else is doing it. They consistently buy at the peak and panic-sells at the bottom. Lesson: Emotional investing rarely pays off. Discipline beats Intellect. EQ > IQ 5. Single-Source Sameer – Sameer depends majorly on stock market returns as his sole source of income. He's vulnerable to downturns and lacks the financial resilience to withstand market downturns. Lesson: Financial security requires diversification, not just within investments but also across income sources. 6. Pessimistic Priya – Priya buys too much into market headlines and is waiting for the next crash. She misses out on long-term compounding while holding cash forever. Lesson: Optimism is the default mode for successful long-term investing. You must believe in human progress, not doom. 7. Recency-Biased Rahul – investors like Rahul assume recent market trends will continue indefinitely. They extrapolate short-term returns into forever and ignore market cycles. Lesson: never assume that recent results predict the future. Avoid being these 7 personality types, and you will significantly enhance your odds of becoming a successful investor. PS - the names taken here are totally random and not meant to be targeted at anybody. This picture was taken in 2022 when I had the lifetime opportunity to meet with Will Danoff of Fidelity, the world's biggest fund manager. He has especially focused his investment career on avoiding behavioural blunders. #InvestmentStrategy #PsychologyOfMoney #PersonalFinance #StockMarket #FinancialLiteracy #LongTermInvesting #EmotionOfInvesting

You won’t hear this often admitted from someone who’s raising capital for real estate…I made a poor investment. A MISTAKE..... It was a LP deal in my personal portfolio, invested with a multifamily sponsor I didn’t properly vet. I had some cash and wanted to put it to work quickly. They have 6,000 units, so I figured they had a “track record.” It was an assumable, fixed rate deal, so thought I was fine given the macro. But….they didn’t conduct adequate property level due diligence of their own, so their cap-ex & op-ex budget has exploded. They've had property management issues on top of that, with finger pointing. They didn't provide a K-1 until September, lol. They haven’t paid distributions in about 18 months, 2 years in. I’m hearing some their other assets are in foreclosure. Come to find out, they were volume-driven and with a fee-based focus. Pretty big variance from my typical approach and what I talk about on this platform. Well, I MADE A MISTAKE. I took a flyer and it may cost me. Maybe it won’t, but I'm pretty sure it will. I definitely regret it. To be clear, I would never be as flippant with investor capital. The due diligence level is very involved in that case. The commitment to stewardship of other people’s capital is more important that making money for myself. The latter isn’t why I do this, frankly. I realize I’ll probably lose some people here, but I think this topic is important enough that I don’t care. If someone you are considering investing with says they haven’t lost money before, they are either inexperienced, overconfident, or lying. There’s still time for this deal to work out, but here’s the lesson….always evaluate the deal as a passive investor, don’t just trust the sponsor. No matter who they are. I hear a lot of passive investors put a sponsor’s track record above all else. The deal metrics are barely a consideration. Careful of the track record….It might just be a track record of shooting fish in a barrel. I KNEW this, but sometimes a reminder through pain is the best teacher. Sponsor, deal, market, macro/micro…all very important factors in outcome. 

I’ve lost $100,000 to scammers 3 different times. I’m honestly embarrassed to write that, but if I’ve lost out on all of that money I figure the least I can do is educate others about the risks 😂. I’ve had an amazing return on my overall portfolio because of my willingness to make big bets, but with that I’ve also learned some hard lessons. Do these 5 things and you’ll avoid 99% of the most likely investing scams: 1. Extensively Google the names of founders who approach you. Look for lawsuits. Look for fishy or conflicting records on their actions and why they pulled the plug on previous projects. 2. If you have any doubts, reach out to people who worked with those founders in the past and ask them about their experience. And if don’t know them personally or have a reliable character referral, be very skeptical.  3. Don't trust your gut. Invest defensively. I get excited about movements I believe in. I buy into high energy. This energy has helped me scale a lot of my businesses and find success, but it can also make me too trusting of others—when what I need to do is focus on the numbers. Shamelessly ask for all of the hard numbers you’d need to justify the decision even if you’d never met the founder. I have a friend or two that I bring along on my deals who are great at asking the hard and uncomfortable questions. I need someone more skeptical in the deal with me. 4. Look for “black swans”. Do research that explores the question, “What are the things I don’t know I don’t know?” Every time you get scammed it’s a “black swan event”, where something you didn’t previously think was possible or even know about comes to pass. 5. Treat your friends like enemies if you want to stay friends. Sounds very cynical, but what I mean by this is to make sure that you have tight contracts and agreements in writing, where goals, expectations, and terms of cancellation are clearly outlined. Have a clear and clean exit plan the minute things go south. Anyone have any other tips they’d add? #scam #scammers #aiscam #business #investing #lifelessons #mistakes #growth

Some folks know that I have a deep personal interest in financial planning. I frequently end up discussing how to talk to kids and young adults about building strong financial habits early. One of the all time classics, JL Collins’ Simple Path to Wealth, has been recently updated. It is a terrific starting point, originally written for his daughter, that covers so many critical basics: 1. Spend less than you earn 2. Use the super powers of compounding and time as early as you can 3. Fees and taxes matter (a lot), so invest accordingly 4. Own the market (don’t try to beat the market) through a diversified low cost equity index fund 5. Set it and forget it - monthly or biweekly investment into your 401k or Roth (or both) 6. Buy and hold for the long term, you don’t need this money for 40 to 50 years 7. Market declines are a blessing as you are buying stocks on sale, as Nick Maggiulli says just keep buying (also a good read) I don’t agree with every single point in the book. As an example, I prefer some direct international allocation and I wouldn’t be 100% equities, but these are quibbles in the grand scheme of things. This is a very straight forward approach that demystifies investing and would serve most people well for a lifetime. Most importantly, anyone can understand and implement this approach. A great place to start!!!! https://a.co/d/91rbGtW

Things I messed up at my last investment I’ve made good bets. But this one taught me more than most. Here’s what I got wrong no sugar coating: 1. I trusted charisma over competence. The founder could pitch the stars out of the sky. But when it came time to deliver? Silence. I saw the charm. I ignored the gaps. 2. I assumed market size = market access. Huge TAM on paper. But I forgot how hard distribution is without the right connections, especially in regulated industries. 3. I was too hands-off, too early. I thought we’d be “supportive, not intrusive. Translation: I didn’t ask the hard questions until it was too late. 4. I underestimated burn. Great tech, long runway, right? Wrong. Spending went up faster than traction. And my scenario planning didn’t include reality. 5. I confused ‘early traction’ with product-market fit. A few pilot clients ≠ are a scalable business. The signal was noise. I didn’t press hard enough on retention or usage. I own it. Every investor has their graveyard of deals. This one hurt financially and personally. But every mistake made me sharper. And if you’re not willing to be wrong, you shouldn’t be in the game. I don’t invest because it’s safe. I invest because I believe.

"Your financial advisor is ripping you off!" "Avoid the fees and do it yourself!" "Just say no to fees!" 👆 This is what "finfluencer" content often looks like. I get it. Many financial firms have an "overcharge and underdeliver" mindset. Extracting tens of thousands in fees and providing little in return. However... there's this idea that people can achieve the same results on their own vs. working with a financial professional. If this is the case, - Fire your dentist - Do haircuts at home - Stop going to the doctor - Draft your own estate plan - Figure out how to fix your own car - Gather herbs and berries instead of buying medicine 💲 You certainly will save a lot in fees. But what will your outcomes look like? Will you reach your goals? 🤔 Now - if all your financial "advisor" does is roll your assets over and stick them in a model portfolio, yeah. You can easily skip the 1%+ fee and DIY. But real financial planning goes far beyond picking investments. Real financial planning is 👇 - cash flow guidance - proactive tax planning - retirement forecasting - uncovering blind spots - managing portfolio risk - estate planning guidance - employee benefits optimization - retirement withdrawal strategies - tax-efficient portfolio management - insurance review/recommendations - planning for education and other goals - help with everything in your life with a dollar sign And that can be worth hiring someone. 👉 What do you think - haircuts and surgery at home? Or pay an expert? ------------ 7 Saturdays Financial has capacity to onboard 4 more families in 2024. If you want your money to work as hard as you do → Visit my website to book a complimentary meeting! **This post is general education, not financial advice.**

A CPA's guide of where to put your money 1. Establish an emergency fund. Aim for at least 3 to 6 months of living expenses. This cushion will provide you peace of mind for any unexpected events. 2. Then max out your employer's 401k match, if one's available to you. This is essentially free money and a "guaranteed" return on investment. 3. Take a look at your debt. Pay off any high-interest debt first - especially credit card debt, which typically carries the highest interest rates. This can often outpace any returns you might earn elsewhere. 4. If you have access to a Health Savings Account (HSA), consider maximizing your contributions. Not only are contributions tax-deductible, but withdrawals for qualified medical expenses are tax-free. PRO TIP: Invest some of this money into the stock market if you have that option. 5. Max out your Roth IRA. If you're over the income limits, look into a "back door Roth". The benefits of tax-free growth and withdrawals in retirement are too good to pass up. 6. Any leftover funds can go towards a taxable brokerage account or real estate investments. Some level of diversification is key here. 7. Lastly, but perhaps most importantly for some of you, invest in yourself. Whether it's books, courses, or hiring a coach or mentor, investing in your own growth will increase your income potential now and in the future. Remember, this is a suggested order and might not be perfect for everyone. Always consider your own unique financial situation and goals. It's always best to consult with a financial advisor. If your goal is financial freedom, remember this is not a sprint, but a marathon. ---- If you found this helpful, reshare ♻️ and follow me for more content like this.