Rule #1 Finance Blog

With Investor Phil Town

Smart Investment Practices to Make More Money

One of the biggest obstacles I hear holding people back from investing is that they think it is too complicated or risky, but if you know smart investment practices it really makes the whole process a lot simpler.

The truth is that the longer you put off investing, the more you miss out on your best opportunity to grow your wealth.

If the fear of losing money is holding you back, you should know that there are ways you can substantially reduce your risk. We can teach you smart ways to invest money that can set you safely on the path to financial freedom.

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Why You Need to Start Investing

If you don’t invest and just leave your money in the bank, the interest you get from a savings or money market account probably won’t even keep up with inflation. You could be losing money, and the longer your money sits in the bank, the less purchasing power it will have.

When you invest, it’s the opposite. The longer you leave your money in smart investments, the more that your money will grow. Over time, thanks to compound interest, your money can double, redouble, and keep on growing.

The best time to start learning about investing is right now. We provide a free Smart Investing Cheat Sheet that gives you an easy-to-follow action plan to set you up for success.

What Are Some Smart Investments?

Once you decide to invest, you have a choice of several types of investments. You could invest in homes or commercial property. You could invest in gold or in bonds.

Rule #1 investors believe that the smartest investment — as long as you do your research — is buying shares of stocks, which means you are buying pieces of companies, but let’s take a closer look at all of these options.

Is Gold a Smart Investment?

The price of gold rises and falls, depending on the demand.

Demand tends to go up only when people are feeling afraid or uncertain about the future. The problem with investing in gold is that you can’t accurately predict what the demand will be at any particular time.

That makes investing in gold more like gambling than like smart investing.

Is Property a Smart Investment?

Homes and commercial property can be good investments.

But Rule #1 investors like to look for investments that are selling at only half of their actual value. That’s hard to find if you are buying real estate, where the selling price is usually close to the value.

Becoming a landlord can also be a hassle. You’ll have ongoing obligations to take care of your buildings and your tenants. It’s often easier and at least, if not more, profitable to invest in the stock market.

Is a 401K a Smart Investment?

Putting money into a 401K is a smart investment if your employer matches your investment.

Otherwise, you are better off investing in individual companies. 401Ks usually give you a limited choice of mutual funds, which track the whole market or large segments of the market.

By using smart investment strategies to pick companies yourself to invest in, you have the potential for much higher returns than you would get with a mutual fund.

Are Stocks a Smart Investment?

Plain and simple, stocks ARE a smart investment.

When you buy stocks, you benefit in two ways: from any increases in the price of shares of the stock, and from any dividends that the company pays to its investors.

The more successful a company is and the more it grows, the more that your investment will grow too. Rule #1 investors create a moat of safety by buying companies when their shares are selling at a price that is half-off the company’s value.

Smart Stocks to Invest In

When you use the Rule #1 strategies, you look for wonderful companies that are priced at a discount.

So, what exactly does that mean? Here are the four key characteristics that make a stock a smart investment.

Stocks Whose Business You Understand

Always understand the business of the companies that you buy. When you have knowledge or experience in an industry, then you can be a good judge of whether a particular company in that industry is truly wonderful or not.

Stocks That Have a Strong Business

Look for companies that will continue to prosper over the long term. Smart stocks to invest in are companies that are well run, have their finances in order, and have something intrinsic to their business that helps protect them from competitors.

Stocks That Have a Strong Management

Before you invest in a company, make sure it is run by people you respect and trust. Do research on the CEO. Look for someone who is on fire, who is driven to excel.

Stocks That Are on Sale

When you buy a company at a price that is less than its actual value, that gives you a margin of safety. If you then practice patience and wait for the stock price to rise to meet the value, you will be richly rewarded.

To better understand each of these concepts, watch my quick video, How to Invest $1,000, where I show you smart ways to invest money in stocks.

Getting Started

Our Rule #1 Cheat Sheet is a step-by-step guide for getting started as an investor.

The Cheat Sheet’s 10 steps will give you the tools and knowledge you need to make smart investment decisions. Download the Cheat Sheet now, and you can get started right away.

 

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Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.