How to Make a Good Investment?

The Essential Guide

Place your money Investing your money is much simpler than many think, especially from a long-term perspective.

Recommended read : How to Adjust Your Diet After a Kidney Transplant?

Unfortunately, people are terribly irrational when it comes to investing their money. They prefer the certainty of losing money over the risk of making money.

If you want to make the most of the opportunities offered by a good investment, this guide will be essential for you.

FREE: Receive your training on financial freedom CLICK HERE

The problem of our time is that you can’t open a newspaper, turn on the radio, or watch television without hearing bad news about financial markets or mentioning one or another real estate crisis.

Fear indeed sells.

You can’t reasonably expect to see a journalist write a headline: “No news, everything is fine!”

Therefore, regarding financial investments, many of us believe that nothing is still possible. “The French are calves,” said General de Gaulle. If we look at how they manage their money, the observation remains relevant. How can we explain that a country producing more than 400 cheeses can only place most of its savings in two products whose profitability is notoriously pathetic: the savings book and euro life insurance?

And the situation is not going to improve. The government had already decided to freeze the remuneration of Livret A at 0.75%. As for the performance of euro life insurance funds, it is now expected to fall below 1.5%.

Known for their aversion to risk, investing money thus boils down to saving in a savings book or signing a low-risk life insurance contract.

They are wrong, big mistake.

Because the sad reality is that they are losing money.

The interest on a savings book doesn’t even compensate for inflation. Because I must remind you that inflation was 1.85% in 2018 and will reach 1.2% for the total of 2019.

The French are thus becoming poorer day by day.

To invest money correctly, there is no other solution today than to invest in stocks.

You can learn more about this topic and become a happy investor by getting this free training: click here .

Why is the interest rate so low?

The decline in interest rates is mainly due to low growth prospects.

The cyclical recovery period between 2015 and 2018 is over. The global economy has been slowing down since last summer, partly due to the increasing uncertainty related to trade tensions between the United States and China, and Brexit. Industrial activities, in particular, are under pressure, especially in Germany. The fear now is that consumers will stop spending their money.

But, of course, the policy of the European Central Bank also plays a role. The deposit rate corresponds to the interest earned by banks when they deposit excess savings with the ECB. But since this interest has been negative since June 2014, banks have to pay significant interest. This encourages them more to lend money to a business, for example, than to leave it with the ECB.

Furthermore, it is possible that the ECB will buy bonds.

President Mario Draghi launched this supply program in March 2015 and continued it until the end of 2019. During this period, the ECB has already injected 2,600 billion euros into the financial system to fuel inflation and pull the economy out of the collapse that followed the severe financial crisis of 2008. This policy has also led to a decrease in interest rates.

In this climate of uncertainty, investors flee to government bonds considered safe, thus reducing interest on government securities.

What does this mean for savers?

The interest on savings accounts is mainly determined by short- and medium-term rates and, to a lesser extent, by long-term rates. But if the ECB is considering further reducing the deposit rate for banks, banks will be inclined to raise interest rates on savings accounts, excluding regulated savings accounts.

Moreover, given that the goal is to maintain inflation, the return on savings will remain below the inflation rate.

So, the only rational way to invest is to buy stocks.

Yes, but… the timing is bad to invest your money

History is full of financial disasters: the Great Depression of the 1930s, the Great Crash of 1987, the terrorist attacks of September 11, 2001, the Madrid bombings in 2004, the real estate bubble in the United States, the bankruptcy of Greece, the crisis in Cyprus, Brexit, etc.

And this time, it’s the crown.

It’s always something.

Each time, stock markets have suffered but have recovered just as well. Sometimes even the markets do so well that we hear: “It’s not the time to invest, as prices will soon drop!” It’s always something.

“Apparently, it’s never the right time to invest your money properly. The reason is that most people only think short-term. What a mistake!

FREE: Receive your training on financial freedom CLICK HERE

The question I am most often asked

One of the most frequently asked questions about investing money is: where can I always find a return of 10% today?

This is a question that continues to amaze me. There have always been investments that do this, with objective, measurable, and proven results.

During my last audit this year, I discovered more than 1,500 investment funds sold in France that recorded a return of over 10% over the last 10 years!

So why still this curious question?

Let’s take, for example, the S&P 500, which is a serious and independent stock index based on the 500 largest publicly traded companies on U.S. exchanges. Since its inception on January 1, 1927, so for more than 90 years, it has recorded an average annual return of about 10%, dividends reinvested.

Despite all the disasters that have occurred during this long period (including a world war), despite the bad news, despite the problems with the stock markets, despite the various events, someone who invested one euro in 1927 in the S&P 500 receives, without doing anything, without touching it, more than 6,500 today.Huh.

Investing your money this way gives you much more than a savings book, with less risk in the end.

It is indeed very difficult to assume a total disaster with this index, as that would mean that the entire economy of the largest nation in the world would disappear. I don’t know if you are like me, but that still seems like a stronger guarantee than that offered by a savings book, which is supposed to be guaranteed up to a maximum of 100,000 euros by states like France, Greece, Italy, or Belgium that have been practically bankrupt for a long time! I really wonder how they will repay everyone the day there is a major problem with a big bank.

But that’s the great paradox: people are terribly irrational when it comes to investing their money. They prefer the certainty of losing their money over the risk of making money.

Since the beginning of 2013, the U.S. stock market has been breaking records again and has already forgotten all the previous bad numbers.

And maybe by the time you read this, it will have fallen again (and more?).

That’s what stock markets do. They go up and down.

And yet, in the long term, from a perspective of about 20 years, all these disasters and successes do not really influence the course of financial history: at a minimum /- 20 years, stocks always win.

You must invest your money for the long term

I can never repeat this enough. If you really want to invest to gain your financial freedom, you must be able to do without your money for at least 20 to 25 years, or even longer if possible!

If you intend to use your capital before that deadline and do not want to take risks, there is only one solution: the savings book! But if you want to invest successfully, you simply need time. Investing in stocks means that the value of your invested capital will fluctuate every day or even every minute. But the longer your investment horizon, the less impact these market fluctuations (= volatility) will have on your investments.

If you invest in stocks, you have surely noticed that there are more days when the stock market rises than days when it falls. A run to the top does not happen smoothly and will be occasionally interrupted by stock corrections.

Timing is essential for investing

If you have invested money to renovate your bathroom in the next two years, such stock market corrections will soon be likely! If you want to at least compensate for your loss, your capital will always need to be invested for several years.

The probability is much greater that you will achieve your goal if you have a 20-year horizon rather than 5. That’s why it’s better to invest for the long term (20 years or more).

GLOBAL MARKET EVOLUTION

Time heals all wounds, even comrades. Past accidents can be painful, but long-term investing always softens the pain. The longer your investment horizon, the higher the probability of a higher return.

But even over a 10-year period, investing your money in stocks brings in much more on average than any other type of investment:

Source: Rabo Bank

Your investor profile

It is important in this matter to take into account your investor profile when investing your money.

You must absolutely make the type of investment that suits you best.

In general, you will take less risk as you age. Someone in their fifties usually invests less in stocks than younger people. This will be reflected in the proportion of stocks, fixed-income investments, and cash reserves. The logic is simple: as you age, you will obviously have less time to correct a major stock market crisis, and investing your money correctly becomes a more difficult task.

The investor profile of a 25-year-old will be completely different. To invest their money, this person has several decades ahead as an investment horizon. A few bad years in the stock markets are not actually important because it has been proven that in the long term, stocks always have the best return on all financial investments.

Investing your money is simple

Putting your money only in a savings book or life insurance is therefore in no way a responsible attitude towards maintaining your wealth and the future of your family, unless you are very old, and even then.

But at the other end of the spectrum, there are also people, and I have met a few, who spend hours every week sweating over their stock investments. These are the ones who buy individual stocks and seem to really enjoy reading company balance sheets and analyst opinions.

Most of us, however, are not like that. And certainly not me. We want good performance with low risk, but between our jobs, families, and leisure activities, we don’t have much time to follow the market. We have much better things to do.

If that summarizes your situation, I have the perfect portfolio for you to invest your money effortlessly. It will not only outperform the performance of most people who spend hours on their investments, but it will also beat about 80% of the money managed by professionals. And best of all, as an ideal houseplant, this portfolio grows on laziness. It has performed superbly even if you only pay attention to it for 15 minutes a year.

This stock portfolio is based on the simple fact that the market is smarter than any individual. If the market says a stock is worth 20 euros, there is a strong probability that this share is probably worth around 20€.

This may surprise you. Most market analysts aim to make you believe that there are hordes of good deals that have not yet been discovered. But think about how the world works and you realize how unrealistic this proposition is.

Every day, thousands of highly competitive mutual fund managers and highly paid pension fund experts scour the market looking for good deals to invest their money. When they think a stock is undervalued, they buy it. Similarly, if the pros believe a stock is overvalued, they sell it and continue to do so until the stock meets their definition of fair value.

Thinking that you will beat the system and find the undiscovered stock is a bit like thinking you can walk through an explored desert and spot a gold mine that all professional geologists have overlooked.

The best proof of the market’s intelligence is that even professionals cannot keep up with it. About 80% of actively managed mutual funds lag behind the market. They are weighed down by the salaries of their managers, research costs, marketing costs, fees paid to financial planners, trading fees.

Here’s a simple idea

If active management does not beat the market, why not throw it out and buy the market instead?

You buy the market by investing in a small collection of low-cost index funds.

These funds passively track the ups and downs of stock indices, such as the MSCI World Equity Index or the S&P500 US Equity Index. Your exact combination of funds may vary, but the main advantage of this stock strategy is that it offers you broad diversification across hundreds of stocks and/or bonds at an extremely low purchase cost.

Why is this so important?

Because low costs are essential to investment success.

Most investors pay about 2.5% of their assets each year to invest in actively managed mutual funds, or worse still, in buying individual stocks.

While you can become a performing investor for 0.2% per year or less. The two percentage points you save go directly to your net profit and can have a significant effect over time.

Let’s say you have a portfolio of 200,000€. You could save about 4,600€ by becoming a passive investor rather than losing money in actively managed mutual funds. After a few years, assuming you reinvest all your savings, the difference would grow and grow. Assuming typical rates of return, the money you could save this way would be more than enough to buy you a luxury car in 10 years’ time. Which I don’t really advise you to do, you have better things to do with your money than buy a fancy car.

Every time I show the numbers, people are naturally skeptical. Investing your money this way seems too good to be true.

Is it that easy?

Of course it is.

Again, the handbag is simple to understand, but people are complicated.

And is that what expensive professional management cannot accomplish?

Unfortunately, no.

If you doubt, consider that the S&P 500 has generated returns of around 10% for decades and decades. Compare this to what the average actively managed mutual fund has achieved, and I think you will be impressed.

Investing your money easily and intelligently is just common sense.

My investment strategy is based on four ideas

The first idea, as we have already seen, is to keep your costs (very) low. Thus, you, and not your financial advisor, reap the largest portion of your portfolio’s return.

The second idea is to diversify across different types of assets. By doing so, you ensure that no accidental event can devastate your portfolio. You could, for example, use a classic balanced strategy, which consists of putting 60% of your money in stocks and 40% in bonds, but you can adjust the stock component if you are young and willing to take additional risks in search of significant returns. Conversely, you can decrease the share of stocks if you are older and more conservative.

Note, however, that at the time I write this, interest rates are so low that it is worth keeping your money in cash and bonds.

A model portfolio could therefore be, depending on your own beliefs, something like:

60% in an MSCI World index
40% in a bond index

75% in an S&P 500 index
25% in cash (waiting for better interest rates)

any other combination of up to 2 to 5 indices if you want to put accents in your management, as I do myself in my own portfolio.

The third idea is to rebalance once a year to return to your initial asset allocation. If your stocks increase in value, for example, you need to sell some and invest the proceeds in bonds. This ensures that you are constantly selling at high prices and buying at low prices.

Suppose you want to build a portfolio with 50% stocks (with an S&P 500 index for example) and 50% bonds (with a bond index). You now buy 100€ of both every month. After a year, you have bought 1,200€ of stocks and 1,200€ of bonds. So, you have spent 2,400€. Now, you will look at the value of your portfolio after this first year. You may find that your stake in the S&P 500 is now worth 1,400€, and that in the bond index 1,250€. That’s good, your portfolio has performed well since you spent 2,400€, but your portfolio is now worth 2,650€! On the other hand, you now have more value in stocks than in bonds, whereas your strategy was to have 50%. So, you should have 1,325€ in each category. Therefore, you will sell 75€ of stocks and buy bonds with that money. Your portfolio is once again rebalanced to 50%-50%. You do this once a year.

I assure you that it is more difficult for me to explain it than to execute it yourself. Once you understand the principle, it only takes 5 minutes each year.

The fourth idea is to build your portfolio gradually. You invest your savings each month and thus avoid the whims of buying at a specific moment. You will automatically buy more stocks when their price is lowest. You always win. If you invest for the long term, as I always advise you to do, then the timing of your purchases is much less important than the time you keep your investment. If you buy a few shares each month for at least 20 to 30 years, you will smooth out all short-term fluctuations. That’s why I believe there is no bad time to invest in stocks.

That’s all. If you follow these four ideas, you will succeed. You can adapt this strategy to your situation and individual preferences.

Investing your money this way is extremely simple and productive. In lesson 27 of my training Become Rich. How to use. I teach you, step by step, in simple and understandable French, which fund to choose and in which bank, and how to do it with the least cost, and above all with the least taxes possible (yes, I even mention names!).

You can also become a millionaire, guaranteed.

Get to work in 3 moves

1. Consider only 4 compartments to invest your money

The online savings book prepares for your big purchases and saves for the down payment on your house or your investment in rental properties.

To be truly rich, you invest the vast majority of your savings in investment funds suited to your age and situation to benefit from high long-term returns.

Life insurance contracts (good security and excellent potential return) are in some cases a highly recommendable solution.

Complete this mix with real estate investments.

2. Buy the training that will guide you

BECOME RICH User instructions.

2020 Edition

Earn more, invest your money, become a homeowner.

Learn to become a millionaire and financially independent.

3. Learn all the secrets to invest your money