Hey everyone,
Back with more learnings over the past month.
With the markets bearish (down) year to date, it’s been a good time to take a step back to reflect on the journey so far and recalibrate.
Times like this are actually good as it forces one to re-think one’s investment strategies and mindset.
Well, here’s my strategy - one which I started out with and will now focus on more. Not financial advise.
The mindset and strategy is based on what I’ve learnt from these 2 men:
The mindset went it comes to building wealth, generational wealth, is thinking:
invest not speculate,
years not overnight,
patience not quickly,
discipline not as-and-when
compounding not windfall
Dave Ramsey through his webpage shared the following statistics on millionaires in the US ( The National Study of Millionaires | RamseySolutions.com)
Millionaires are made not born.
Regular consistent investing was key in being a millionaire.
People doing everyday jobs can be a millionaire.
These stats destroy what we see on social media these days, doesn’t it?
There is a path for common folks to build generational wealth - it’ll take time but it can be done. We can start where we’re at, with the income that we have by being consistent and disciplined in investing and let the magic of compounding do its thing.
Here’s a framework Dave Ramsey proposed:
Step 1: Build cash fund, if you’re tight financially start by saving $1,000. If you’re financially better off, aim to build 3-6 months of expenses in cash. This fund is meant for emergencies.
Step 2: Focus on paying off debt first - debts like student debt, housing debts. Dave believes in being debt-free.
Personally I have another view on this, this video below best explains it. There is a point that Dave makes however, that if so happens we lose our regular income, being debt-free really lowers the financial stress placed on oneself. Its a valid point. The way we handle debt (whether to focus solely on paying debt off first ASAP or not) really depends on one’s situation.
Step 3: Invest 15% of monthly income into mutual funds as there’re smart people managing the fund for you. I think these days exchange traded funds (ETFs) are great as well with lower management fees and more liquidity.
He recommends spreading our investment capital into 4 baskets:
Aggressive growth fund - 25%
Growth fund - 25%
Growth & income fund - 25%
International markets - 25%
That’s it! Once Step 1 & 2 is covered, keep repeating step 3 regularly and consistently.
Recently Sean Seah did a great sharing session on his investing mindset. Watch it HERE.
In his book, Financial Joy 2.0, he also recommends having liquid cash savings of 3-6 months set aside for emergencies and sufficient insurance coverage before starting to invest.
When it comes to investing, he recommends the following breakdown of our investment capital:
70% - Proven but boring investments → S&P 500 (SPY), Nasdaq 100 (QQQ) - this funds are historically proven and probability of big volatility is low.
20% - Proven but not boring (needs some active monitoring) → Single stocks - Investing in stocks are essentially investing in businesses so some active monitoring is required with regards to the stocks invested in.
10% - Research & Explore → Crypto, NFTs, Business Ventures - this have the least track record so far but may offer a tremendous upside.
Hope this has been helpful for you!
I’m currently looking into crypto tokenomics. Essentially price of crypto is governed by the laws of supply and demand. I should be sharing more on it next month!
Till then, be safe.
Justin