Where should I invest to become rich? Investing for wealth

Where should I invest to become rich?

Invest in assets such as in the stock market or physical real estate if you want to become rich. The stock market and real estate are the most common paths for individuals to build wealth. Additionally, you can invest in your own business ventures which can make you even more money.

Imagine, having your money make you money while you sleep.  Eventually, your account balances are making you more money than you do at your nine-to-five job.

In order to become rich, you must invest your money.

Luckily for you, I’m going to show you what to invest in if you want to get rich. I will even show you where millionaires invest their money and how investing can make you rich. Don’t expect overnight results because investing is a long-term game.

21-058 - Where should I invest to become rich Investing for wealth

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Can investing make you rich?

Investing can make you rich over time. The more money you have in investments, the more money your investments can generate for you. Eventually, the money in your investment account generates a snowball effect of wealth-building. 

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Contributions over time make you rich

The main things that matter the most when you want to get rich is time and money invested. You need to invest a lot of money over time. The amount of cash invested works with time to provide you with investment returns.

For example, you can invest $300 per month for 30 years. At a 10% return on investment, you would have nearly $700,000 at the end of the 30-year period.

However, you may not be satisfied with only ending up with $700,000. What if your goal was to hit 1 million dollars in 30 years? The only thing you have control over is your time frame or the amount you invest.

The first thing you can do is increase your investment from $300 per month to $450 per month. Now, at the end of 30 years you will have $1,000,000 assuming a 10% ROI.

However, some people can’t manage to increase their monthly contributions. Therefore, you may have to increase your investment timeline. You can hit 1 million dollars investing $300 per month in 34 years at 10% ROI. 

Your first $100k is the hardest

If you want to get rich investing then you need to get as much money invested as possible. A 10% return on investment of $1,000,000 is much more than $10,000. Reaching your first $100,000 will be the hardest part about investing.

Someone who is new to investing does not have a whole lot of money in the market.  A new investor may only be able to contribute $5,000 in their first year investing. Having a good return on investment of 10% would only yield $500.

As you can imagine, you’re not going to be able to live on $500. Instead, you need more money invested to make your returns more powerful.

The returns on your investments up to the first $100,000 are usually pretty horrible. However, you’ll notice your investment account start to pick up momentum after your first $100k. Now, a 10% return on investment on $100,000 is $10,000!

As you can see, you are contributing $5,000 per year, but your investments are making you $10,000. Now, your portfolio balance is increasing by $15,000 per year.

As a result, reaching $200,000 invested is going to take less time. Every $100,000 increment becomes faster and easier to reach. Eventually, you’ll hit 1 million dollars invested before you even know it.

Now things get really crazy. A 10% return on investment of $1,000,000 is $100,000. Your investments are now making more money than most people make from their job.

Compounding interest is when your money begins to make you money. Compounding interest is how you get rich from investing.

What should I invest in to get rich?

The best assets to invest in for building wealth have traditionally been the stock market and real estate. The majority of people would benefit from investing in a low-cost S&P 500 index fund. However, investing in stocks, real estate, and even starting a business are all proven ways to get rich. 

At this point, most new investors might feel hesitant about getting started investing. You don’t want to be the one that invests and loses a bunch of money. Remember, if you don’t feel comfortable investing that you might want to find a financial adviser.

Exchange traded funds

I would venture that the majority of individuals should be investing and exchange-traded funds. Exchange traded funds or ETFs are a collection of stocks focused around a specific fund goal. Investors can purchase one exchange traded fund and obtain access and diversification to hundreds or thousands of individual companies.

Most individual investors want the most hands-off approach when it comes to investing. You want to be able to go to bed at night and not worry about your investments. ETFs are one of the simplest ways to start investing.

Think of exchange-traded funds like buying a basket of eggs. Each egg represents individual companies that you are investing in. Should one of the eggs crack, you still have plenty of others. 

Start off by researching your exchange-traded funds. Look for low cost ETFs, like the ones Vanguard has to offer.

Make sure you understand what each ETF is aiming to accomplish. For example, some ETFs are built for dividend income and others for growth opportunities. Evaluate the risk of each ETF and narrow it down to the ETFs you want to invest in.

Your goal as an index fund investor is the buy-and-hold for a long period of time.

Real estate

There are many different ways you can invest in real estate. The riskier, but more financially rewarding is to invest in physical real estate. Alternatively, you can invest in Real Estate Investment Trust (REITs) or real estate crowdfunding.

Physical real estate is one of the best places to invest your money.  You can take out a mortgage in order to buy the property which is being paid off through your tenants rent. Not only are you getting the cash flow from rent, but the home is hopefully going up in value, known as appreciation.

Real Estate Investment Trust are companies that invest in real estate. The majority of Real Estate Investment Trust will pay a dividend or a cash payment for owning a share. Therefore, you have exposure to real estate and you don’t have to manage the property.

Real estate crowdfunding is another option where you lend money to real estate companies. The real estate companies then invest your money into different projects.

Individual stocks

Individual stocks can be very rewarding or very risky. Some companies increase in value at a rapid rate, like Tesla. Investors can choose to invest in specific companies, but doing so isn’t well diversified.

Not to mention, most of us don’t know how to pick individual stocks. You don’t want to invest in a company that then goes bankrupt the next day.

However, if you know what you are doing then you can find great companies at a great price. Some stocks manage to return over 1000% in a matter of a few years.

Make sure you learn the stock market before you go all in on individual stocks. It’s never a bad idea to keep some ETFs in your portfolio for added diversification.

Where do millionaires invest their money?

The majority of millionaires invest their money between stocks and real estate. An average millionaire works a nine-to-five job and has been consistently investing their money over time. Starting a business can make you a million dollars, but the majority of millionaires are investors.

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Summary: Where should I invest to become rich?

As you can see, the key to becoming rich with investing is slowly over time. You want to make regular contributions to your investment accounts over the course of years. A lot of people think they can get rich overnight, but that’s just not the case. 

The best places to invest your money are typically the stock market or real estate. The stock market can be easier to make money because it is hands off. Real estate can evolve a lot of repairs, but you can also invest in REITs or crowdfunding.