If you have any significant amount of money in a savings account you’re leaving a lot of free cash on the table. You know you have to invest but getting started is a scary prospect. That’s where The Betterment Experiment comes in.
I’m a lazy guy, I want my savings to make me money but I don’t want to spend a lot of time on it. My time is crunched as it is. I’m looking for solid long term investments that kickass and beat the market average.
The good news is we’re at this sort of inflection point with technology and accessibility where tools and services that use to only be available to the elite few are now available to the masses. A perfect example of this is Mint.com which I highly recommend using because it takes hours out of managing your wealth.
The investment vehicle we’re going to focus on here is Betterment. I’ve already talked about Betterment a few times on this blog (here, here and here) and as I’m sure you’ve gathered, I think it’s an incredible tool to automate your investment efforts and build real wealth. This difference with this post and the others is that I will be investing my own money and documenting the entire process so you can see how easy and painless it is to have your savings generate you more savings.
It use to be that getting a mortgage for a house was a scary concept. Now, getting a mortgage is a terrific idea! See, when our parents were trying to get a mortgage they had to pay rates of 7% at best and now we only have to pay 3.5% interest. The amount of interest you pay between the two is an incredible difference!
Low interest rates are one of many reasons why you really need to act now. Don’t have enough money so you figure it’s not worth reading on? Don’t forget that FHA loans only require 3% down on the purchase price. You can sure count on that not lasting forever!
I was budgeting like everyone told me to and packing my money away into a savings account. My savings grew really fast. Once I had cracked the code of being financially responsible it was easy. I went to work every day and after two years of working and saving smartly I had a nice war chest built up. It wasn’t like I was rich or anything but it was a lot of money for me at the time. I wanted to make my money earn more money so my savings could multiply. I wanted to learn how to invest like an expert!
I read everything I could get my hands on about investing. I bought the book Warren Buffet used to base his life investment strategy off of (The Intelligent Investor) and it became my mantra. The problem was I didn’t have enough time to be competitive with all of the other stock traders. I needed to do a ton of research, keep my finger on the pulse of the macro economy and have the time to crunch a ton of numbers until I found a security I liked. I had a full time job, a social life and a budding romantic life. There had to be a better way.
After a lot of research, I’ve landed on two tools specifically that I like for equities. Betterment (which I’ve already mentioned here and here) and eToro. You may be looking for a more hands on approach (which I’m still working on writing up), however you may find them helpful in your quest to have your savings earn money for you. Let me explain how I’ve used these tools to grow my war chest.
Most people don’t realize it but every year fees are slowly destroying their retirement. These fees are very tiny and often ignored. However, over the course of time they can cause serious damage. If you’re contributing regularly to your 401k (and I really hope you are!), you should be very concerned. To protect your retirement you need to destroy 401k fees.
Fortunately, destroying 401k fees is easy and not very time consuming at all. You can definitely look at the prospectus of each 401k fund you have by hand but I never really want to spend so much time tweaking my 401k. So, for the sake of this post I’m going to walk you though the awesome tool I use.
These days just hearing the word “investment” is enough to send shivers down your spine. It’s been four years since the financial crisis and while we are definitely doing better, our wounds still ache. Everybody knows someone who lost a job or a huge chunk of their retirement savings. Depending on who you ask you’ll hear a different cause for the crisis but the one take away from the whole thing is that everyone is afraid of the stock market.
With those wild price fluctuations and monster crashes, why risk your money? Most people are just holding on to huge savings accounts that blow your mind at 1.0% interest. Now, while you have near zero risk with your money in a savings account, you’re also making near zero investment gains.
If you save $5,000 a year from the year you start working until when you retire you’ll only have saved $246,190 at 1% interest. Probably not enough to retire. However, if you put it in at the yearly average market return of 10% over 40 years you will have $2,659,116 (yes, millions). Quite a difference, no?
“But Andrew, it’s so risky and it’s too difficult, I don’t have the time to manage it.”
Don’t worry my friend, it’s not nearly as difficult or risky as you think, allow me to walk you though my patent pending No Effort Investment Strategy step by step.