Intermediate Investing

Welcome.

So, since you still want to beat the market over the long term and you want to have even lower costs, you'll need to get just a little bit more advanced.
Strangely, this is easier than you think - you probably already know what to invest in.
I'll just show you how.

First, to make this easiest, you'll need an online discount broker like the following:

That's not an all-inclusive list but it gives you an idea of the kinds of online, discount brokers that I am referring to.

Just check them all out and pick one that you like based on your wants and needs.  Then, sign up for an account with them, they'll help you to make it easy for you - they want your money - so they are happy to work hard to make it easy for you to give it to them.

Next comes the fun part, figuring out which companies' stock to buy.

Imagine that you had just been given a vast pile of cash to invest...enough that you could buy whole businesses, instead of a few shares of stock.  Which companies would you buy?

Or thinking of it another way, which companies do you know, right now, as a layperson, are awesome businesses that make money all the time?  It's probably a quick list of the biggest, best businesses in the world.

My favorite way to think of it though, is whose products do you use day after day, without even thinking about it?  This works especially well if you think of yourself as an average person and leave out your own personal tastes and preferences.  What's common.  What do people use without thinking?

Start in the morning - you wake up and go the bathroom - whose products do you use?

Easy, you probably touch a half dozen products made by Proctor and Gamble (PG) and Johnson and Johnson (JNJ).

Then, you leave the bathroom and fix breakfast for the family.  Whose products have you bought to satisfy that need?
Probably Kellogs (K) and General Mills (GIS).

As you are getting dressed, whose products are you touching and making sure you take with you?
Got an iPhone? (AAPL)
Or maybe yours is an Android (GOOGL)?
Perhaps, in a spendy past life you bought a Coach (COH) purse or wallet or case to carry your things?

Now, you have to get to work - its most likely that your transportation uses some sort of fossil fuel.  Which are the biggest best companies in the oil and gasoline business?  Exxon Mobil (XOM) and Chevron (CVX), of course.

Now, you get to work.
You sit down at your desk and login to your computer running whose software?
Microsoft's (MSFT)
It's built using whose chips inside?  Intel (INTC) is inside, of course.
Look up at the wall, or ask your IT guy - whose products form the backbone of the intranet and internet that your computer is going to connect to?  There's only one answer.  Cisco (CSCO)
Who carries that information that you are using on their lines?  AT&T (T) or Verizon (VZ).

Does your company use any cloud computing?  Or any massive servers?  Big Data?  Who does those?  Microsoft again, IBM (IBM), and Amazon (AMZN)

Ahh, time for lunch.

You head out to grab a quick bite to eat.
Which is the biggest, richest fast food place in the world?
McDonald's (MCD) and while you are inside whose cold drink goes best with your fries?
Coca-Cola (KO).
Oops, you spilled something on your shirt - gonna have to bleach that...
You're thinking Clorox (CLX) aren't you?  :)

You decide that since you've been bad for lunch, your going to eat healthy tonight at dinner so you plan to stop by the organic grocer to pick up stuff for dinner on your way home.  Whose the best in that arena?  Wegmans (a private company - we can't buy their stock) and Whole Foods Market (WFM).

Back at work you grab a chocolate bar, probably made by Hershey (HSY) while your friend goes outside for their smoke break.  Whose cigarettes are they smoking?  Probably something from one of these Philip Morris (PM), Altria (MO) or Reynolds (RAI).

You get home from a long, hard day at work.  What's the number one frosty, cold adult beverage for most people?  Yep, they crack open a Budweiser (BUD).  More a liquor person?  You probably have bottles of the stuff made by companies owned by Diageo (DEO) - did you know that?

Thinking of buying some stuff?  Where would you go to buy it?  Wal-Mart (WMT) or Target (TGT), if you're like most people.

Thinking of going out to dinner?  Which company delivered the food to that restaurant?  Almost certainly it was Sysco (SYY).

What if you have a medical challenge - as so many people do?  You'd probably be accustomed to using products, even if you didn't know who made them, from Medtronic (MDT), Beckton Dickinson (BDX), and the medicine you need probably was delivered by Amerisource Bergen (ABC) or McKesson (MCK) to Walgreens (WBA) or Rite-Aid (RAD).

Start thinking for yourself now - who is the biggest bank or two?
Who are the strongest insurance companies?  Who do you use?!

Thinking about it this way, you'll come up with quite a list.
Just the ones that I put in bold are 35 different top companies.  That's a lot of diversification!  Diversification helps protect us from what we don't know, don't expect or foresee, and which we can't control.  At this intermediate level of investing - embrace the philosophy of diversification!



Now, just put an equal amount of your money into each stock.  Easy peasy.



I do have one caution here - if you are just starting out - or if your investment account balance is a little low - invest in chunks of at least $500 at a time.

That way you keep your commission fees down under 2% of your purchase price.  If you're starting out this way, each time you get $500 - buy another $500 chunk of shares in one of these companies.  Keep doing it until you fill out your list of companies.



Want to take this strategy even further?  Of course you do!  This is Advancing to Greater!  We want to do things in a great way!

Simple - and free - Enroll your shares in your broker's Dividend Re-Investment Plan.
These are often referred to as DRIPs.
This way, when your shares pay out a dividend, your broker will automatically convert that cash into more shares - even partial shares - of the company for you.  And it is FREE!
DRIPs are a free way to see the power of compounding work perfectly and automatically on your behalf.


Here's the hard part - especially for the intermediate investor - do nothing.
Never sell.
No matter how bad the market looks.  Ignore the news.  Watch a movie instead. The world has a way of keeping on keeping on, no matter how bad things look.

Want to make this easy on yourself?  Set up your broker to automatically pull money from your bank account to fund your investments.


NEVER SELL.  Let your DRIPs work for you over time.

Congratulations, you're now quite a good investor.

Getting Rich is Boring!!!

Welcome

Getting control of your finances is fun.

Figuring out how to develop a Spending Plan that will allow you to hit your goals is empowering.

Paying off each successive debt is gratifying and the sense of real progress is palpable.

Its exciting, you're making changes.  You're making decisions.  You're Adding Assets and Limiting Liabilities.  You're making worthwhile sacrifices.

And then, one day, you become debt free!  

You go out to a nice dinner as a reward.  

You feel the blades of grass between your toes for what seems to be the first time ever.  Your elation is causing you to break out in little happy dances at random times.  The sky is so beautiful, you feel the air in your lungs and the warm sun on your face.  You're happy.  You're smiling.

Then, after a couple of days, you are in bed trying to go to sleep when you realize that you just made it to zero.  You got out of the hole that you were in.  The perpetual smile starts to slip.

And while getting from a negative net worth to a positive one is awesome and it was totally worth it, all of a sudden you realize that it doesn't mean that you've made it.  You're not wealthy yet.  You're not financially independent yet.

Now you're on the path to becoming wealthy.

It is boring.  You keep doing what you had been doing.  Except now its automatic.  You've developed the habits.  You've setup automatic transfers so that some of your money goes automatically into your savings and investment accounts.  You don't have to make cliffhanger-dangerous financial decisions because you are not a slave anymore - you don't owe.  

Its kinda dull.  

That is exactly what the process of becoming rich feels like.

It is slow.

It is not dramatic and fast-paced and it is certainly not a wild ride.

Becoming rich is a process that takes time.  

Even if you invest 70% of your take-home pay (easier for higher-earners, for sure) - saving up enough to have your Freedom Figure is still going to take you 8.8 years.  That can feel like a drag.

That is the feeling of becoming wealthy.

When I counsel people on their finances and they get out of debt - sometimes even before they get all the way out of debt - they will invariably tell me that the 'fun' went away.  They're right.  It did. 

Becoming wealthy is more fun the further you get into it, but it is a process, and it always starts slow.

It takes time.  

It takes persistence.  

It takes consistency.  

It demands your resolve and discipline.

Having your Freedom Figure in your investment account is worth it.  I promise you, it is worth it.

Pursue your goals for your reasons, but earn your freedom.  

Push through the boredom of becoming free.

Betterment - Better Investing

Welcome

Is this you?:

• You don't want to pick stocks.  
• You think there might be a way to do better than an index's buy-and-hold methodology.
• You don't know how to do it yourself.

If you resemble those remarks, there's Betterment.


At Advancing to Greater we want to elevate you to better and better levels of success in many areas.

I happen to be very, very good at investing.  Most people are not.  How then, to advance to greater?

Knowing all that I know, if I were directing a friend or family member to a simple investment broker that will take care of them and do it for them, I would direct them to Betterment.

Betterment's idea is simple: low cost investing designed around a custom-built plan that uses low-cost ETFs or funds.  Further, they take advantage of tax-loss harvesting to maximize your gains and minimize your tax and fee burden.

If you want the the low-cost of Vanguard-style investing combined with a few tricks of the trade in the world of investing and you want it all to be simple, elegant, intuitive, fun, and cheap - you can't do better than Betterment.


*I'm not affiliated with Betterment and I do not receive any compensation from them in any way.

Invest Your Emotions

Welcome.

I have realized more and more that much of what is covered here on Advancing to Greater (especially the stuff that relates to early-retirement) is in line with the tenets of Stoicism.

A great friend of mine has knowledge of this philosophy which is greater than my own and whose writing I happen to quite like.
As a result, I asked him to write this guest-post (the first ever!) for you to enjoy and, perhaps, learn something from.  Please consider following his work on his blog.

Thank you, John.

Investing for Beginners

Welcome.

So you've saved up your Emergency Fund and you have paid off your debts...

Now it is time to start piling money into investments so that you can reach your Freedom Figure.

It is this pile of money that you will use to sustain yourself through the rest of your life.

As a result, this is quite an important thing to feel confident about.  The rule of thumb is that for every $10,000 of annual spending, you need about $250,000 of investments.  That ratio puts you within the range of a safe 4% withdrawal rate from your account(s).

What kind of accounts exist?  What do I need?

This is the only challenge for a newer investor, as you need to become slightly educated about these options so that you can make informed choices, but its really not that hard.  Luckily, Vanguard makes it easy for you.
Click on this button on their homepage to see all the different kinds of accounts and what each is for.

First, take stock of what you might already have?  Do you have an old 401(k), 403(b), or 457 account from an old job.  Those can be rolled over into your new account(s).

Second, what is your plan?  If you are planning to reach your Freedom Figure earlier than what the rules that the government has set for tax-free or tax-deferred withdrawals say, you may need to consider regular taxable account(s) too.  Those have no rules or penalties about when you can access your money.

Once you have gone through the steps to open your account, the rest is simple.  You buy shares of VTI and just keep piling money into it until your account reaches the value you need in order to retire, your Freedom Figure.

That ticker symbol's all you need, the Vanguard Total Stock Market Index.  Low fees are a huge advantage that Vanguard offers and it makes a tremendous difference to the performance, and eventual value, of your investment account(s). That's it, period.

That's it.  

There's no big secret.  

It's not hard.  

Vanguard does a good job of making it easy for you to do business with them. I whole-heartedly recommend them.

If you want to make even more money the fine folks at RB Research will tell you when to buy and sell VTI.  Look at the bottom of each of the posts on their Facebook page.