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.
