The annualized return of the S&P 500 over the last 12 years is 5.9%
My annualized return over the last 12 years is 10.8%
Investing isn’t for generating wealth. It’s for preserving it. So I’m not rich, but I do okay. Over the course of my working career, I’ve saved up a lot of money and invested it all.
I made an average 10.8% annual return for twelve years.
Want to know how I do it? Read on.
How I Invest
First, a disclaimer and warning.
Investing money always carries risks. I’m going to tell you how I’ve been investing my money. You can use this information to invest your own money if you want, or you can shake your head and ignore it. Don’t invest any money that you can’t afford to lose.
Believe me, I have lost half of my money not once, but twice. Each time, I had faith and kept my money in the market. Both times, I made the lost money back and then some.
I play the long game. I’m not trying to get rich quick. My only goal is to beat the market, which is surprisingly difficult to do. If you want to play the stock market safer, then don’t follow my advice. Follow Warren Buffett’s advice: “put it all in a low-cost index fund that tracks the S&P 500 and get back to work.”
1. Set up an account at an online brokerage
I use Ameritrade. I have also heard good things about E-Trade.
2. Decide how much to invest
Remember, only invest what you can afford to lose. Take the total amount of investment money and divide it by 60. For example, if I want to invest $120,000, I divide that number by 60 and come up with $2,000. That $2,000 is how much money worth of stock that I’ll buy every week. In other words, it’s my position size.
3. Buy a stock every week
Every Friday, I crunch the numbers using the various techniques I’ve learned (based mainly on Magic Formula and RSI, you can look it up) and advice from several investment newsletters I subscribe to (Motley Fool, The Altucher Report, Curzio Research… you can look those up as well). Then I come up with the best stock pick of the week. I’ll buy that stock.
After 60 weeks you run out of money. At that point, choose a stock you’ve had for over a year and sell it. Use the money from selling the stock to buy the new stock of the week. Rinse, and repeat.
I use spreadsheets and the Motley Fool scorecard to keep track of all of my investments.
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