One way to reduce your debt is simply by earning more. Since you’re probably working as hard as you possibly can with no time to spare, that extra income needs to come from a passive income source like an investment. When considering investing, you might be led to believe that a broker is an essential part of the process, but it’s important to ask if you really need a broker. Is their help essential for securing an investment and their advice necessary for your success?
While there are probably brokers who are well worth their fees and commissions, many are merely salespeople interested in the fees and spiffs they get from selling stocks rather than in helping you achieve financial independence. In many cases, too, you may not even be aware that you’re paying a sales commission. For instance, when you buy a mutual fund, the 5% commission you’re paying out may be included in the price. That extra percentage you’re paying is not going to improve the performance of your mutual fund!
Invest Without a Broker
So how do you get around paying a broker for their help and advice? Here are some ways to invest without a broker:
1. Invest in cryptocurrency.
If you want to set up an account with Genesis Mining and start mining cryptocurrency you don’t need a broker to tell you how many bitcoins to buy, when to buy them, and when to sell them. You can figure all this out for yourself with some research.
2. Manage your own investment portfolio.
You can manage your own diverse investment portfolio without the help of a broker. While it might be easier to use a broker, it is well worth the extra time it takes for you to learn how to do it for yourself. Moreover, becoming an informed investor will probably help you outperform the standard index benchmarks better than relying on advice on what to do.
If you invest, say, $10,000, a year, a broker will charge you about $500-$600 to place your order. You can save this money by learning to place your own investment orders. Although you might be inclined to dismiss this small amount for the convenience, let’s put this into perspective: if you were to invest the money you had saved in fees over a period of 30 years at a compound interest rate of 10% a year, you would earn a little over $100,000. You can learn to place your own investments for index funds, Exchange Traded Funds (ETFs), and no-load mutual funds.
3. Tap into the magic of compound interest.
Albert Einstein is famous for saying, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” He thought so highly of compound interest that he believed it was what separated the rich from the poor. So how does compound interest relate to investing? You reinvest all your gains, and at a 10% average annual rate you will have doubled your money back in less than a decade (on average in less than 8 years.)
Two Guidelines for Investing
In closing, here are two best practices you should follow as an investor:
1. Pay yourself first.
When you earn your salary, pay yourself 10% from the gross. If you can’t do this then you are either underemployed or living above your means. So adjust your circumstances to be able to pay yourself 10% from your gross income each month. However, don’t simply put the money under your mattress or in a savings account because the money will get eaten up by inflation. Instead, ask your bank to transfer this money automatically into your investment account.
2. Don’t invest your grocery money.
It’s not a good idea to assume that you’ll always make gains and that if you make a heroic effort your sacrifice will be rewarded. The stock market rises and falls. Your goal is to make gains over the long run rather than hoping for a quick win. So, only invest your surplus income: that is money that is not going to pay immediate expenses or that is not part of your emergency funds.
