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time constraints

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no exuses

no excuses

You’ve worked hard to build up your savings account.  There’s no reason why you can’t put that capital to work for you.  The stock market is an incredibly powerful and convenient tool that allows you to do just that.

But how do you actually go about using this tool to grow your savings?

The Standard Advice

  • Hire a professional to do it for you.  Unfortunately, when you account for fees and commissions, most money managers fail to beat the returns of a passive index fund.
  • Buy and hold a low cost index fund or ETF.  The downside here is that you would be vulnerable in the event of a major stock market crash.  Depending on the timing and severity, you may have to wait DECADES to be made whole.  It took over 15 years for the Nasdaq Composite Index to reclaim dot-com era highs and 26 years on, Japan’s Nikkei index still sits at BARELY HALF the level it was at the end of 1989.
  • Dollar cost average into a low cost index fund or ETF.  This is better, but it still relies on the assumption that the market WILL bounce back in the timeframe you need it to.  If you have A LOT of time, that has generally been a good bet.  However, I’m not convinced that it will be ALWAYS be a good bet.

Personally, I’m not willing to settle for mediocre returns from an expensive money manager.  I’m also not interested in patiently waiting for my account to recover from a market crash.  Been there, done that.  No thanks.  There is another way.

My Advice:

  • Buy stocks that are going up
  • Sell stocks that are going down
  • and DO-IT-YOURSELF!

It really is that simple.  So why don’t more people do it?  There are a lot of reasons, but for now, let me just address the two excuses I hear most often.

Excuse 1: “It’s too hard”

Repeating this statement is like holding up a white flag.  I mean sure, you have to apply yourself and do some work.  You do have to learn about managing risk and your emotions.  It shouldn’t be a surprise that something worthwhile will take some effort.

But let’s be honest: this isn’t brain surgery.  Hell, I can do it!  My background is computers and music, not Wall Street.  Seven years ago I didn’t know the first thing about stocks.  If I can figure this out, there’s no reason why you can’t as well.

Learn the rules of a trend following system like the 821x and then study charts.  See how a big winner looks at it’s buy point and vice-versa for big losers.  It’s not hard, it just takes practice and repetition to identify the best setups.

 

buy signal

buy signal

 

sell signal

sell signal

 

Excuse 2: “I don’t have time”

Do you have time to watch TV?  Do you have time to play video games?  Do you have time to surf the web?  I could go on but I won’t.  Just answer the following questions and be completely honest with yourself.

Is it worth investing the time it takes to develop a valuable skill that will ultimately lead to increased personal freedom? 

Is the short-term sacrifice worth the long-term benefit? 

If your actions are not congruent with your answers, perhaps you need to spend some more time on this to figure out the truth.  For example, if you continually engorge on junk food, one would have to seriously question the veracity of any claim you make about wanting to lose weight.

Another thing to keep in mind is that the first step is always the hardest and most time intensive.  Once you get past the learning curve of a system like 821x, it really should only take a few minutes a night to look through charts and enter orders if any.  The cost in time spent is miniscule in comparison to the potential benefits.

So get busy.  Don’t be afraid to make some mistakes.  Lose the excuses.  You can do it!

a powerful savings growth vehicle

a powerful savings growth vehicle

Enough about the ineffectual helper.

Where can you find a valuable partner who will actually move the needle in advancing your financial goals?

In other words, how can you actually GROW your savings?

Hard assets such as real estate and precious metals are viable ways to store and sometimes grow your wealth.  However, they are illiquid, meaning they are generally difficult and time consuming to sell and transaction costs are high.

Rental properties are an excellent way to grow your savings that I highly recommend.  I have a rental property myself and it has been a fantastic investment.  Like any investment though, it’s critical that you buy well.   In the case of rental properties this means the right price, the right house and the right neighborhood among other things .  You also have to be prepared to handle ongoing maintenance which can include things such as fixing leaky plumbing and dealing with late rent checks.

This brings me to my favorite way to growth wealth; the stock market.

Financial markets are one of most powerful and convenient vehicles for wealth creation in the history of world.  There’s a reason the wealthiest 10% in America own 81% of all stock assets.

Stocks don’t suffer the same drawbacks that the other asset classes mentioned above do.  They are extremely easy to buy and sell (i.e. they are liquid).  They don’t require ongoing maintenance the way rental properties do.  Another often overlooked advantage they have is you can make money whether they increase or even decrease in value.  In general, all other asset classes must increase in value in order for you to make money.  However, you can make a fortune in stocks even if the stock market crashes by selling short, buying puts or using inverse ETFs.

I understand though, that there are two major hurdles keeping most on the sidelines:

– lack of time

– fear of losing money

Let me briefly address both of these concerns.  Frankly, the learning curve to consistently making money with stocks is actually pretty steep.  You will need to spend a significant amount of time initially to develop a trading system that you trust works.  However, once you have that down it doesn’t really need to take a long time to manage your portfolio.

The second concern is also a valid one.  The stock market is like a minefield.  Buy the wrong stock at the wrong time without a robust risk management plan and you can easily blow up your account.  At a high level, the key is to cut your losers quickly and be patient with your winning trades.  If you do this consistently, you can have more losers than winners and still make money overall.  This is because some of your winning trades will represent much larger percentages than your losers.  For example, if your position sizes are all the same, a single 25% winner more than makes for four 5% losers

I’m not going to lie.  Making money with stocks is not easy.  However, the rewards are immense if you can develop these skills.  I share the nuts and bolts of one of my trading systems in the 821x eBook.  Feel free to take that as a starting place as you start to develop a trading system of your own.