The One Investment You Must Make If You Want To Be Financially Successful

I recently came across some investing horror stories that readers shared on a couple of popular investing websites.  Here are some examples:

  • One reader bought a stock fund at $48 and sold it at $24
  • Another reader bought gold at $1,800. Current price: $1,050
  • Another reader bought Washington Mutual stock at $20. Current price = $0 (declared bankruptcy)
  • Another reader lost $1,500 in penny stocks
  • Another reader bought $20,000 of AOL stock options that rose up to $200,000. The reader hesitated to take profits and lost not only the $180,000 profit but the original $20,000 also
  • From one reader: “Paid an investment rep at ____ (a major brokerage) to give me crap advice for about 7 years”
  • Another reader bought stocks on margin and within 2 weeks had lost 50% of his money. This investor didn’t sell, hoping to get his money back.  The 50% loss turned into a 90% loss soon after.

These people should not have been investing in the first place – they obviously didn’t know what they were doing.

Do you?

Can you answer the following questions?

  • Do you know what bonds are and how they work?
  • Do you understand exactly how taxes can affect your stock returns?
  • Are no-load mutual funds worth investing in?
  • Do you know what a stock’s dividend yield is?
  • Are royalty trusts a good investment?
  • Do you know what a property’s cap rate is, and why it’s vital information to know when buying rental real estate?
  • Do you know why gold and silver should be part of your investing portfolio?

If you can’t answer these questions easily, you really shouldn’t be investing either.  You’re just gambling with your money if you’re buying stocks, bonds, real estate, gold and silver, or any other investment without knowing the answers to these questions.

My Own Horror Story

I can relate to the investing horror stories I read about.  I have had my own share of investments that turned into disasters.

Here’s just one:  I ran a small account from a few thousand dollars up to over $43,000 in several weeks.   I then managed to quickly lose all of the $40,000 profit AND my initial investment!

I didn’t know what I was doing back then, and I paid for it. I didn’t have the financial education to avoid mistakes like this.  I can only blame myself for my results.

Instead of gambling with my money, I should have first made the one investment that everyone must make if they want to become financially successful.  And that’s an investment in financial education.

Financial Education

Let’s get clear…

Financial education is the starting point to building wealth.  Financial education is investing in yourself and your future.

You must develop financial and investing skills if your goal is to build wealth and create financial success.

Financial education is the difference between just getting financially by and creating a financially abundant future.

Lack Of Financial Education In School

Unfortunately, the U.S. public school system for decades has never provided any personal finance or investing education to students for grades K-12.  Not even the basics like something as simple as balancing a checkbook.

By the time a young adult graduates from high school they have had twelve years of schooling, and 95 percent of students graduate without any clue on how to answer these basic questions:

  • Do you know the difference between an asset and a liability?
  • Do you know the difference between investing for cash flow vs. capital gains?
  • Do you know how our tax system works, and how real estate especially benefits from our tax code?

Can you answer these questions?

I know I didn’t learn the answers to these questions in school.  I had to learn the answer as an adult through trial and error, including making major investing mistakes like the investing horror story I just told you about.

I could have avoided that $43,000 loss if I had received the financial and investing education first, then invested my money.

The Cost?

So, what’s the cost to people who don’t take it upon themselves to get a financial education?

Well, it’s no wonder that, in a recent study, more than 57 percent of people said their savings and investments add up to less than $25,000.

28 percent of those polled said they had saved less than $1,000.

This is the price you’ll pay: you’ll have no financial future.  Don’t let this happen to you!

Why Financial Education?

Money affects all aspects of our lives – where we live, what career we choose or job we take, our healthcare, our living standards, and more.  So it’s important to understand how to make the best use of the money we make throughout our lives.

Financial education allows you to know what to do with your money, how to do it, and most importantly, why you should do it. It will enable you to do the following:

  • Learn good spending and saving habits, like how to minimize monthly expenses and maximize the amount of money that stays in your wallet each month.
  • Learn how to be financially responsible by being careful with debt, retaining a high credit score, and shopping for the best rates on loans and other financial products.
  • Increase your income and ultimately your wealth so you can be in control of your financial future.
  • Create a secure retirement, or even an early retirement, without the risk of running out of money.
  • Create more choices in life.

“Financial education needs to become a part of our national curriculum and scoring systems so that it’s not just the rich kids that learn about money… it’s all of us.”

– David Bach

Start With A Plan And A Roadmap

Over my 20+ year investing career, I’ve learned two important secrets to financial success:

  • You either plan to succeed financially or you don’t.
  • You have to have financial education to be able to create a successful plan

It’s that simple.  There’s really no shortcut.

A plan will give you a detailed roadmap to follow on your trip down the investing highway.

Your investments – whether stocks, bonds, real estate, tax liens, or gold and silver – are simply vehicles you can use to travel to your end financial destination.

But without this roadmap – without understanding how all these markets really work, separately and together – and without an overall plan, it’s very difficult to get where you want to go.

A plan is a blueprint for taking you from where you are now to where you want to be in the future.  And the good thing is that once you take action, you will see the benefits for the rest of your life!

Your Money And Financial Success is Your Responsibility

No one cares about your money as much as you do.  It’s your responsibility to make sure you are making informed choices with it, not blindly entrusting it to someone.

Without financial education, you will not able to make the best decisions for yourself.

You’ll end up relying on others to make your financial decisions.

If you give your money to a broker or financial planner to invest, you still need the education to know if what they are doing with your money is in your best financial interest, not theirs.

The Wall Street Game

Here is an example of why you must have financial education.

The financial services industry is big business, and a very profitable one at that.  It is designed to extract the most money from you in fees and commissions.

The investing banks, brokerages, and mutual fund companies that make up Wall Street are in business to maximize their profits, not yours.

It’s a multi-trillion dollar business, and they are playing with your money – and in ways that you are not aware of at all.

For example, employees put their retirement money into their employer’s retirement plan.  Most of these plans offer a limited choice of investment options, usually stock and bond mutual funds.

Now, who created the plan and provided the choices you are given? The giant mutual funds are usually the plan’s sponsor or administrator and thus the investment choices are limited to a small selection of their products.

Unless you are financially savvy enough to understand their offerings, you won’t realize the fees and commissions you are paying, either directly or indirectly, when you invest in mutual funds.

Why do many retirement plans exclude exchange-traded funds (ETFs) as one of your choices?  ETFs have far lower fees than mutual funds.  ETFs aren’t offered because the mutual fund companies don’t make as much money in fees off them.

With a modest-sized portfolio where you invest in mutual funds over 30 years, you could lose more than $100,000 to fees in a mutual fund!   Investing through ETFs may cost you only $15,000 in fees.

That’s $85,000 that disappears from your retirement account.  That money went into the mutual fund’s bank account directly from yours.  And you had no idea it happened……

The point of this is that you must become financially educated to understand what is going on with your money when you place it in the hands of others.  Your money will likely slowly disappear otherwise.

Financial Advisors & Brokers

You also cannot just rely on the “pros” to make the best investment decisions for you.

Many people just think, ” It’s too much work to learn how to invest.  I’m just going to give my money to a financial advisor or planner.”

As mentioned earlier, blindly entrusting your money to a financial advisor or broker can be very dangerous.  It’s an inherent conflict of interest to be paid for managing other’s people money and deriving an income from it.

To make things worse, the personal finance industry – consisting of financial planners, financial advisors, stockbrokers, etc., – overall does not earn a good report card.

You can learn more about working with financial planners and advisors in this article:

Financial Advisor Or Investing Coach – Which Is Right For You.

So, What’s The Answer?

What can you do to make the most of the money you make?  How can you make sure you get good investing advice?

Your first step is to educate yourself.  I know I sound like a broken record, but this is the only true way to create lasting financial and investing success.

It was only through investing in myself – by giving myself a thorough financial education on money, wealth building, personal finance, and investing – that was I able to find success and reach my financial goals.

20 years ago, it was much harder to find the information you need.  But today, there are lots of great books, personal finance and investing courses, and coaching resources available.

So, what actions are you going to take today?

Are you going to move forward, and do what it takes to create the financial future you really want?

Or are you just going to read this, and then do nothing…..

Years ago, I decided to become financially successful.  I set out on the path and it literally made me a fortune.

I’m a big believer in financial education because I know the difference it made in my life.

I hope you’ll join me on the path!

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