15 years ago, this high school kid invested $2,000 in the stock market:
Pro investing tip: it’s all in the shoes
He read every investing book, opened an E*TRADE account, and bought the hottest stocks he could find.
That kid wound up paying his way through Stanford University. And today, he runs a multimillion-dollar business that he founded.
But guess what?
His success has nothing to do with the stocks he picked. In fact, he lost half of that $2,000 investment — overnight.
How do I know? Well, that high school kid was me, and trying to find the best stocks to invest in was one of the dumbest money mistakes I’ve ever made. I might as well have flushed that $2,000 down the toilet.
In this post, I’m going to show you how to really earn a great return on your money. I’ll cover the 2 biggest investment myths, and show you the ingredients you need to actually get rich.
Here’s a hint: “What are the best stocks to invest in?” is the wrong question to ask.
The 2 Biggest Investment Myths
Myth #1: Investment “experts” consistently beat the market
Year in and year out, professional money managers fail to beat the average stock market return. That’s like getting straight D’s in school and failing every test you take.
In fact, after studying the returns for 2,076 mutual funds over a 32-year period, one group of researchers found that very few — a number “statistically indistinguishable from zero” — professional money managers EVER beat the market benchmark.
In other words, they didn’t just underperform. They underperformed by a lot — for decades.
As for the few investment “experts” who did beat the market, it’s safe to say they had dumb luck at best. Because they didn’t repeat that success very often.
It seems like the only thing Wall Street “pros” are extremely good at is confusing luck with skill.
As William Bernstein, author of The Intelligent Asset Allocator, says:
“There are two kinds of investors, be they large or small: Those who don’t know where the market is headed, and those who don’t know they don’t know.”
Here’s the truth. Anyone proclaiming they can pick stocks or time the market is either:
- lying to you
- deceiving themselves
- selling you something
Even the world’s best investors — people like Warren Buffett and Peter Lynch — only earn an average return of somewhere between 10-15%.
Yes, that’s much higher than 7%. But there are less than 10 people in the world who’ve ever done that consistently.
And these people invest for a living! Most investors, like you and me, pick stocks in our spare time — so how can we expect the same results?
Even if you could beat the market once or twice, do you really want to spend 40 hours a week researching, micro-managing, and, ultimately, guessing which direction a handful of stocks will go…just to earn a few more percentage points?
Probably not, especially since there’s a much better alternative.
What if you could spend an afternoon building a “set it and forget it” portfolio? A portfolio that guarantees your money is automatically going where it was supposed to?
That’s what I prefer to do. And it’s the same strategy recommended by Nobel Laureates and billionaire investors like Warren Buffett.
They say just follow these two simple steps:
- Pick a low-cost, diversified index fund. These are funds that invest your money across the whole market, so you don’t need to worry about picking the “best” stocks.
- Automate your investing so you do it consistently. That way you can stop chasing stocks and relying on guesswork. Then you can spend your time on the Bigger Wins in your life.
That’s step one. Do that first. But if you’re interested in earning the greatest returns, make sure to read investing myth #2 and its truths.
Myth #2: Investing is the best way to get rich
Try to name a billionaire who made all their money from investments.
Yes, there are a few. But they mostly inherited their wealth.
The vast majority of self-made millionaires and billionaires started a company of their own or wound up running a company they joined (think: Sheryl Sandberg, Steve Ballmer, Eric Schmidt).
Only after that did they begin seriously investing the money made from their businesses and careers in stocks.
Why is that?
Because it’s practically impossible to make a lot of money from ONLY investing in stocks.
Even if you invest a million dollars today, it’ll take you at least a decade to double your money earning 5-7% a year on your portfolio.
Sure, after 20-30 years of disciplined saving, investing, and earning these 5-7% returns, you’ll have a lot of money. (And I strongly recommend you do that with a portion of your money, just not all of it.)
But my question is: why wait until you’re 60 to get rich? Especially since there are plenty ways you can earn way more than 7% per year — right now!
Here’s the truth: The best way to get rich is to invest in yourself.
If you have an extra $20,000 sitting around, don’t put all of that money in stocks. Put it into a place you can see even greater returns, like your career or a business. When you invest in yourself, your gains aren’t capped at 10-15%. Instead, you could earn 1,000% or more.
3 ways to earn more than investing in stocks
1. Negotiate a higher salary at your current job
What’s the easiest and fastest way to earn a quick return on your time? Increase your salary. In many cases, you can negotiate a $5,000 or even a $10,000 raise in a single, 15-minute conversation with your boss. You’re already getting paid. Why not get the most out of every paycheck? Here’s an Ultimate Guide on Salary Negotiation to get you started.
Check out this student who earned an extra $50,000 using our negotiation tips:
My favorite part: you lock in those gains for life. You can use that raise to fund a side business or just keep the cash. And with that quick conversation you earn way more than you could with almost any stock.
2. Create multiple streams of income with freelancing
Maybe you’re great at writing, tutoring, or fixing things. What if you could turn those skills you already have into a source of side income?
With just a few hours a week, you could easily earn an extra thousand dollars a month (or more), like these students did.
The best thing about earning a side income is that it gives you options.
Want to scale your side business up, quit your job, and get paid to do what you love full-time? You can do that.
Want to use the money from your side business to fuel your other investments? You can do that, too.
That’s the great thing about not making all your income from one place. If you lost your full-time gig, your investments would dry up. But if you have multiple income streams to pull from, your investments will never get off track.
3. Start a business of your own
The absolute highest returns come from having your own business.
Remember when I said my success had nothing to do with stock picking? Well, this is where it came from.
With a business, you can build a product once and get paid for it again and again.
Starting a business is easier today than ever before. You don’t need 50 employees and $10 million in venture capital. You can start out small and scrappy and scale from there.
My company started as a blog I wrote in my dorm room at Stanford. I didn’t have any special advantages. I didn’t know about online marketing, copywriting, or even how to set up a website. Despite that, look at what happened over the past 7 years:
My business’ revenue growth: 2009-2014
That’s a 50x sales growth. You won’t get that kind of return in the stock market. If you’re interested in starting a business of your own and earning the greatest returns possible, let me show you how to get started.
Start your path to lasting wealth
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