Planning Fire

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Summary

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If you have made it this far in your investment journey, congrats! You have a budget, you have worked through an emergency fund, started saving and maxing tax advantaged accounts, decreased spending, and are buying wine by the case. So now what? Well, assuming you read the title of this post you may have guessed it - time to start considering the stock market.

Show Notes

Read this with me: https://amzn.to/2PLQG4A

If you have made it this far in your investment journey, congrats! You have a budget, you have worked through an emergency fund, started saving and maxing tax advantaged accounts, decreased spending, and are buying wine by the case. So now what? Well, assuming you read the title of this post you may have guessed it - time to start considering the stock market.

Why Stocks?
Unlike bonds stocks tend to at least keep up with and even beat inflation, meaning you are not losing money by having them. That is a great start if you ask me. Over a long haul, and on average, stocks return much more than the safer options. If all goes well, and you sell at a win, stocks are actually a tax shelter, and assuming you hold them long enough you only need to be concerned with capital gains.

That said, the stock market is really easy, you can only win or lose on stocks. Considering dividends and other items, there is a good chance to win. That said, unless you know something you shouldn't (which legally, you cannot act on) then you are probably best investing in low fee, or no fee index funds. This way you are leveraging averaging to win at the market.

Rules to Investing in the Stock Market
  1. Only invest money you will not need for many years.
  2. Buy low and sell high
  3. Diversify by buying over time
  4. Stick with it and do not let fear drive your decisions
  5. Ignore all the noise, buy and hold
  6. Beware stocks everyone likes, they are probably already high
  7. Price to earnings ratio is not the whole story
  8. Do not buy peoples "hot tips" it is a waste of money
  9. Invest, do not speculate. Day trading is another thing 
  10. Sell only when a stock has went up so much you think it is no longer a good buy

Ignore Your Broker
This is a big one, and goes against lots of advice. That said, statistically, almost no broker has historically beat the market enough to justify their fees. You want to minimize your transaction costs and odds are you should just leverage a low cost broker. If you do decide to use a broker, make sure they have a "fiduciary responsibility" meaning they have to act in your best interest and not theirs. Oddly, this is not a mandate. Be warned.

Also, along the same lines, if anyone offers you a "hot tip" ignore it. Keep it in mind, but do not act on it, if that stock blows up - perhaps next time put a little more faith in it. That said, you are better off not listening to just any advice.

What is Planning Fire?

Spencer, Chris, Laura, and Sean meet up to discuss their business ideas and report on how their journey to financial independence is shaping up. This show covers all wealth development and financial independence (FIRE) topics. We would love your ideas and to join the discussions!