No matter how much investing experience you have or how much money you have to invest, succeeding in investing ultimately comes down to finding the best investments that work for you.
Of course, finding great investments in the market is easier said than done. To succeed where so many others have fallen short, you’ll need to follow a very specific and calculated approach to finding the right companies to invest in.
Let’s take a comprehensive look at a proven approach that Warren Buffett, myself, and all of the best investors in the world use to find the best investments in 2019 and beyond.
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What is the Ideal Investment?
The ideal investment is always going to be a wonderful company, with a durable, competitive advantage, great management, and that is purchased at a price below its true value.
All other factors such as the state of the market or the industry tend to fall by the wayside when compared to finding a wonderful company at an on-sale price.
In other words, finding ideal investments enables you to make money in the market even at a time when the market itself or the industry that you invested in are performing poorly.
Features of an Ideal Investment
We’ve already shown that an ideal investment is a wonderful company that you are able to purchase on-sale relative to its value. However, what does it mean for a company to be a “wonderful company” and what does it mean for a company to be “on-sale relative to its value?
A wonderful company is one that fits the criteria of the 4M’s of Rule #1 investing – Meaning, Moat, Management, and Margin of Safety.
A company that fits these criteria will be one that has personal meaning to you, one that has a moat that prevents competitors from carving away its market share, one that is run by reliable, trustworthy management, and one that is priced at a point that it offers you a margin of safety on your investment.
This last qualification is another way of saying that the company is on sale relative to its true value.
If you are able to find a company that meets the qualifications of a wonderful company and is also priced at a point that is much lower than its actual value, you will have found an ideal investment.
Smart Investments for Beginners
What qualifies as a smart investment changes from day to day as well as from investor to investor.
In the end, it isn’t all that helpful to list the companies I currently consider smart investments because everybody has different values.
For example, Warren Buffett loves Coca-Cola, he thinks it’s a wonderful company and he drinks a Coke every day. He’s heavily invested in Coca-Cola.
Warren Buffett drinks so much Coke, he’s on Coca-Cola cans in China.
I’m not, because I don’t like that Coke feeds sugar to kids all day long. Everyone values things differently. My goal is to teach you how to find and invest in companies on your own.
Instead of focusing on individual companies, it’s more beneficial to focus on what makes an investment a smart investment for beginners.
As we’ve already covered above, an ideal investment is one that meets the 4M’s of Rule #1 investing. For beginner investors, though, it is meaning that is especially important.
When you are first starting out investing, it is essential to invest in companies that you understand. As your investing knowledge increases, you will come to understand more and more companies, enabling you to branch out into new types of investments.
In the beginning, though, nothing is more beneficial than investing in what you know.
Sticking with companies that you fully understand will allow you to make well-informed decisions at a time when your knowledge of investing is at a minimum.
Bottom Line: Stick to what you know. This alone is the biggest key to making smart investments as a beginner.
Investing Money in the Stock Market for Beginners
No matter how much or how little investing experience you might have, there’s no better time to start investing than right now.
If you try to wait until you understand everything about the market before you invest, you’re going to be waiting for a long time.
While it is beneficial to do your research ahead of time before you invest, you shouldn’t let a lack of experience scare you away from the market. Keep in mind that even ultra-successful investors such as Warren Buffett were at one time entirely new to the market as well.
Everyone has to start somewhere, and the sooner you get started investing, the more time your money will have to grow.
Investing for Beginners With Little Money
What if you don’t have a lot of money? What if you have credit card or student loan debt?
You shouldn’t let a lack of experience scare you away from learning how to invest money, but what about a lack of money?
There’s a common misconception that you need to have a lot of money to invest if you want to have any success in the stock market.
The reality is, though, that you can grow your money and begin making progress in the stock market no matter how much or how little you are starting out with.
When I was first starting to invest, I was working as a river guide making about $4,000 a year. Barely enough money to keep a roof over my head and food in my refrigerator.
Me back in my Grand Canyon days.
Yet even with so little money to work with, I was still able to use the principles of Rule #1 investing to make smart investments and grow my money.
It didn’t take long at all for me to turn an incredibly small amount of money into a considerable sum.
When you don’t have much money to invest, you’ll want to put all of the money that you do have available into one or two carefully selected wonderful companies.
Even just a few hundred dollars invested in a wonderful company can multiply over time, spring-boarding your investing career and starting the process of growing your money.
Investing with little money may bring its own unique challenges, but it’s much better to begin investing today with a small amount of money than it is to wait until you have more.
Thanks to compounding interest, $1,000 can be grown into a small fortune if you make the right investments.
Safe Investments With High Returns
Most people make the stock market out to be much riskier than it actually is.
In their search for what they consider to be a “safe investment”, they end up putting their money into things such as savings accounts, mutual funds, and 401(k)s rather than investing in individual companies.
While it’s true that investments such as these are safe in the sense that the value of your investment is not going to dramatically decrease, the rate of return offered by things such as savings accounts is so low that it is barely even worth the effort.
Most savings accounts, for example, have a return rate of less than 1%, while most CDs have a return rate of about 2%. These rates aren’t enough to even negate the effect of inflation, much less allow you to grow your money in a meaningful way.
The good news is that investing in the stock market can be completely safe if you follow the right approach while at the same time enabling you to achieve returns upwards of 12%.
The stock market becomes risky when you treat it like gambling and make investments in companies that you don’t understand. If you don’t understand a company, you have no business in investing in it.
If you are smart about your investments and only purchase wonderful companies that are on sale relative to their value, the risk of losing money over the long run is incredibly low.
Where to Invest Money to Get Good Returns
If you want to achieve the type of returns that will enable you to actually grow your money in a meaningful way over time, investing in individual companies is the only option worth pursuing.
The return rates of savings accounts, CDs, and money market accounts are simply too low to yield any worthwhile results. While Treasury Bonds are a little better in terms of returns, they too won’t offer enough of a return for most people to come anywhere close to meeting their financial goals for retirement.
Wide diversification, or spreading your money across the entire market by investing in things such as buying the S&P 500 index fund is a somewhat better option, enabling you to achieve an average return of about 7% per year.
If you start early enough and are consistent about investing as much as possible, a 7% rate of return may be enough for you to meet your financial goals over the long-term. However, even a 7% return is not going to be enough for many people.
If you want to get the best possible return on your investments, you will need to invest in individual companies that are carefully researched and hand-selected.
Doing this can enable you to achieve returns between 10% to 15% or higher. For someone who starts investing in their 40s, this is your best and only real option. Otherwise, you won’t make it to retirement on time.
Best Investments for Passive Income
One of the best things about investing in the stock market is its ability to generate passive income. Passive income is essentially money that you do not have to work for.
When you’re generating passive income, you can be earning money while you sleep, play golf, hang out with your family, and anything in-between.
Ultimately, any ideal, successful investment that you make is going to generate passive income. For example, if you put your money into a company that grows in value at a rate of 10% per year, that 10% return is money that you get to pocket without having to work for it. All you have to do is invest your money in the company and watch it grow.
In addition to generating passive income by investing in a company that grows in value, passive income generated through investing can also come in the form of dividends paid by the company to its investors.
These dividends can be a nice bonus, but they shouldn’t be your primary focus – investing in a wonderful company that grows in value over time will most often generate higher returns than even the highest dividends.
That’s not to say you shouldn’t invest in stocks that pay dividends, as these dividends can be a worthwhile addition to your passive income.
However, investing in a wonderful company that is on sale relative to its value is ultimately more effective at generating passive income than simply choosing a company with a high dividend payout.
Learning how to generate passive income is the key to building wealth. It’s simply not possible for most people to build wealth solely by trading their time for money.
By investing in wonderful companies, though, you can begin generating passive income for yourself in a way that will enable you to grow your wealth in a significant way.
Best Investments in a Recession
Recessions can certainly be a frightening time for many investors. However, a recession is not the time to sell out of the market, nor is it the time to sit on the sidelines.
If you are able to keep your fear in check, a recession can be an excellent opportunity to buy a number of great companies at bargain-bin prices.
With that said, though, you have to be especially careful investing during a recession, as not all companies are built to survive a major recession.
This means that if you put your money in the wrong company during a recession, you could risk seeing the value of that investment go to zero.
When investing during a recession, it is essential to invest in strong, proven companies that have a long history of success.
Ideally, the companies you invest in during a recession will have already survived recessions in the past. In fact, one of the best ways to choose companies to invest in during a recession is to look at how the companies performed during previous recessions such as the most recent recession in 2008.
Any company you invest in during a recession should have a record of success that extends back at least ten years. You should also be confident in the company’s ability to extend that record of success for at least another ten years into the future.
Since recessions drive down the price of companies across the market without any discrimination, purchasing companies with a proven history of success during a recession can allow you to buy wonderful companies at a once in a lifetime price.
However, the unfortunate reality is that most people don’t have much money to invest during a recession since they have already put all of their money into the market at a time when valuations were high.
Instead, most people end up selling their stocks during a recession – which is the worst thing you can possibly do.
If you’re buying companies at a significant discount to their true value, you’re automatically protected from falling into the trap of buying in when prices are too high.
The Best Way to Invest Money in the Short-Term (It’s Not What You Think)
It may come as a disappointment to learn, but the reality is that there is simply no good way to make short-term returns in the stock market.
While there are plenty of strategies for short-term investing such as day trading, all of these short-term investing strategies are essentially little more than gambling.
In other words, you may make a lot of money in a matter of weeks, or you may lose everything you have in the same time period. In the end, it’s a tossup and a gamble.
The market is simply too volatile and unpredictable to allow safe, short-term investments. When you purchase a wonderful company at an on-sale price, it’s easy to make money over the long-term as the price of that company will eventually reach its true value.
However, even wonderful companies will fluctuate up and down over the short term, sometimes in dramatic fashion.
This makes it almost impossible to consistently make money through short-term investing. Instead, your focus should be on much safer and more rewarding long-term investments.
The Best Way to Invest Money in the Long-Term
By far the most effective approach to long-term investing is to use the strategies of Rule #1 investing.
Rule #1 investing allows you to select individual companies based on specific qualifications that increase the likelihood of your investment growing in value over the long-term.
When you invest for the long-term using the principles of Rule #1 investing, it is possible to achieve returns upwards of 15%.
These are the kind of returns that will allow you to build a significant amount of wealth over the long-term even if you are starting later in life and even if you don’t have much money to invest.
Long-Term Investment Strategies
Investing for the long-term is all about finding the right companies and keeping your money in them for as long as possible.
In fact, Warren Buffett said that, “The best investment is one that you are able to hold onto indefinitely, growing your money without ever needing to sell it.”
When you invest in wonderful companies that are on sale, it’s possible to keep your money in those companies for decades, watching it grow and compound with every year that passes.
In the end, the most important key to long-term investing success is choosing the right investments. If you put your money in the right companies, it’s relatively easy to make significant long-term returns.
Types of Long-Term Investment Stocks
When you are investing for the long-term, it’s important to focus on the future of the company you are investing in rather than just its current performance.
The best long-term investments are companies that have been around for at least ten years and companies that are set up to continue excelling for at least another ten years still.
Try to imagine the future of the company you are investing in.
- Will it still be as relative ten years from now as it is today?
- What steps are the company and its management taking to set the company up for future success?
- What changes to the world can you see coming in the next ten years, and how will those changes affect the bottom line of the company you are investing in?
These are the types of questions you will want to ask in order to determine if a company is a good long-term investment.
What is the Best Way to Invest $1,000?
You don’t need a lot of money to begin investing, and even investing $1,000 can be more than enough to start with if you invest it correctly.
No matter how much or how little you are investing, the strategy remains the same – you will want to choose a wonderful company that is on-sale, put your money into it, and keep it there for the long-term.
If you achieve the type of returns that are possible thanks to Rule #1 investing, $1,000 can quickly be grown into a significant amount of money that you can use to begin investing more seriously in more and more companies.
The Best Investments Right Now
It’s not all that helpful to pick stocks for you and tell you what I think you should invest in right now. The best thing I can do for you is to teach you how to choose the best stocks for you.
Instead of taking someone else’s word for what the best investments are, do the research yourself to find the right investments for you.
Look for companies that you understand and that fit the 4M’s of Rule #1 investing. If you do this, you can pinpoint the best investments at any given time and select companies that are ideal for you and your individual investing goals.
Where Should I Invest my Money?
There is no shortage of investment options that you can put your money into. However, by far the most beneficial way to invest your money is to put it into individual companies in the stock market.
No other type of investment is going to be able to generate the kind of consistent, long-term returns that investing in individual companies is able to deliver.
If you are looking for the best place to put your money, you can’t do any better than putting into carefully selected individual companies that are set up to grow in value over the years.
Do you need a plan for your investing future? Click the button below to grab a free Map out Your Investing Journey Guide that I put together for you.