I studied finance and the stock market for decades, and though I was a day trader analyzing every movement of the stock market tick by tick, I never had amazing returns. When I look back at all the hours I dedicated to studying charts, reading financial reports, and staying up to date with the news, I realize I could have taken up oil painting or yoga classes and made more money. However, after more than a decade of wasting my time, I discovered these simple rules that brought me to financial independence. Now I devote my time to photography or website building.
- Don’t jump into the latest financial trend. Instead, continuously invest in boring, broad-based index ETFs.
- Don’t try to understand the ups and downs of the market, just invest every month.
If you spend a lot of time trying to figure out the market, over time, if you count the time invested, transaction costs, and taxes paid unnecessarily, there’s a big chance that you’ll end up underperforming the market and wasting time that you will never get back. - Stick to a routine. For example, invest more money at the beginning of every month or transfer money from taxable accounts to nontaxable accounts (TFSA) at the beginning of every year.
- Don’t try to time the market. Stick to a routine and buy regularly regardless of what the market or economy is doing.
- Have a diversified portfolio. For example, a portfolio consisting of 1/3 Canadian index ETF, 1/3 U.S. index ETF, and 1/3 international index ETF.
- Real estate is not an investment, it’s a job. It requires time, money, and mental energy and is not as diversified as a stock portfolio.
- An emergency fund is not as important as people make it out to be. Prioritize paying off debt with interest rates over 4% and start investing immediately, creating an emergency fund as a last step.
If you follow these simple rules, you will out perform 80% of expert money managers and you will free up time to spend oil-painting, doing yoga, or whichever other leisure activity you like to perform.