A lot of people think the % return they get on their money is most important. While it does play a factor, for most people the amount they invest is more important.

While we would all love to get 30% returns on our money every year, that is highly unlikely. To get those high returns, you are taking on a lot of risk. Think of it like this, if your goal is to get 30% returns every year, you would have to be a darn good stock picker.

So what is my point?

Too many people focus on the wrong thing…

Let’s take 2 people, Jack & Jill.

Jack is a high risk taker, but doesn’t have a lot of money to invest. He has $10,000 & wants to make a lot of money with it.

Jill is not a high risk taker, but she does have more money to invest. She has $100,000 & wants to grow her money.

Jack chooses a high risk stock & gets lucky because it grows 40% in 1 year. His $10,000 grew by $4,000 & he now has $14,000.

Jill chooses a lower risk ETF (such as the S&P 500) & gets an average return of 10% in 1 year. Her $100,000 grew by $10,000 & she now was $110,000.

So with A LOT less risk, Jill, in terms of dollar amount, performed 250% better. This is why those who have more principal can build wealth faster without having to take on a ton of risk.

Did you know?

In the example above, it would take Jack 5 years to outperform Jill in terms of dollar amount. AND THAT IS GETTING 40% A YEAR FOR 5 YEARS STRAIGHT!

So what does this teach us? While it is fun to try & get 40% a year in high risk stocks, the key to building consistent wealth over the long term is to focus on your principal & increasing the amount of money you have invested. Once you have a lot of money invested (there is no number specifically, but some would argue $100,000 is a great start) you can take on less risk & still grow your money at a fast pace.

You can do this by increasing your income & increasing your savings rate.

I am not against having a fun portfolio. I have one myself. But do it after you have a solid foundation set aside.  

Real quick, my podcast called The Decade Investor Podcast releases a new episode every Monday & Wednesday. This week I dropped two new episodes:

1. I Invested $250 A Week For 59 Weeks, How Much Have I Made?

2. Becoming Work Optional | Conversation with Mark Palmer

You can listen to them on any podcast playing app here: https://thedecadeinvestorpodcast.buzzsprout.com/share

I want to help you too. I will be able to help you… soon. Stay tuned, I have something coming VERY SOON that will revolutionize the game for Decade Investors.

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Thank you so much for reading & I will see you next week! Until then, keep buying assets.🙂 

- Decade Investor