Have you ever wondered why the rich get richer? How are they investing their money to increase their wealth?
I use to. You see, I grew up and attended inner-city schools in Detroit. All I saw were gangs, violence, poverty, and an overall lack of morale.
By the time I was an 8th grader, my mom moved us out of Detroit into a much nicer city called Oxford. It was an upper-class area. It was in Oxford that I began to develop my ideas about life and what I wanted my life to look like.
Let me explain.
It’s not that we ever lacked the essentials growing up. In fact, my mom did an excellent job making sure we had everything we needed and more.
But something clicked in me when I started making friends in Oxford.
I would go over their houses to hang out and pull up to their beautiful homes with perfectly groomed lawns.
Walkthrough their large front door and be greeted by a smiling mother offering me sandwiches and snacks.
I’m not so shallow to believe that having nice things are what makes a person happy. But what I experienced while living in Oxford was much different than that.
There was high morale. A sense of peace and love. A sense of hope and prosperity. All things I never experienced while living in Detroit.
So why am I saying this? And how is it relevant to the best ways to invest your money?
I’m saying it because I hope that if you’re reading this article, that you can imagine a situation in your life where you felt similar feelings. And if not, that you can at least empathize.
While living in Oxford, I decided that I wanted my life to be filled with abundance, peace, and joy.
I wanted to build up wealth so that my kids could enjoy prosperity, and my kid’s kids could do the same.
I wanted to be financially free so that I wouldn’t have to be stuck working a 9-5 my entire life. What do you want your life to look like?
I don’t want you to read this article, say, “oh, that was nice”, leave the website, and forget you ever read the article 5 minutes later.
Instead, I want you to read the article, take it to heart, and understand that if you have goals and ambitions to improve to your finances, that it’s up to you to take action.
All the advice in this article comes from people who made their fortune by working hard because they had a dream.
Do you have a dream? If so, the only person stopping you from achieving it is yourself. I know that’s mega cliche, but it’s true.
So, with all of that being said.
In this post, I want to discuss the 5 best ways to invest your money according to millionaires and billionaires. Bookmark this article. Come back and read it from time to time so that you can keep this advice at the top of your mind at all times.
1. Grant Cardone: “Invest in yourself”
I have a friend who is a pilot and flight instructor at a flight school.
I have a question to ask you—say someone wants to become a pilot and flight commercial jets that carry tens of thousands of people across the sky every day.
On their first day of pilot school, do you think they are flying real airplanes?
The answer is a big N-O.
In fact, according to my friend, it takes months of specialty training—reading books and sitting through courses. They’re investing in themselves.
Then, after that, the pilots have to go through years of training using simulated flighting programs before they even get to fly a real jet! Again, they’re investing in themselves.
After all that, it takes even more time practicing flying a real jet before they can officially be qualified to operate a commercial plane with people in it.
So why am I saying this?
Your life and your financial freedom are not much different. You must invest in yourself. In fact, it’s one of the absolute best ways to invest your money.
Take Grant Cardone, for example.
If you’re not familiar with Mr. Cardone, he is a real estate investor who owns hundreds of millions of dollars worth of real estate.
When Cardone was 25 years old, he was addicted to drugs and going nowhere in life.
It was only when he had an epiphany to invest his money into himself that his life changed forever.
“When I was 25, I spent my last $3,000 on an audio program, and I can honestly say the investment and commitment to go “all in” are the reasons for my success today. Before that, I was addicted to drugs and obsessed with all the wrong things. One single investment changed the whole course of my life.”Grant Cardone
Cardone’s example is just one out of a thousand cases of why investing in yourself is one of the best ways to invest your money.
You can read many stories of millionaires who read a single book or heard advice from a single person that changed their life forever.
Today, thanks to the internet, you have more than enough resources to gain information. And much of it is free. Take these resources, for example:
Honestly, you no longer have an excuse not to be successful if you really push yourself.
2. Warren Buffett: “Index funds”
What if it were possible to invest in the stock market and be successful without all the time and research? That would be great, right?
Meet index funds.
Index funds are a type of mutual fund that allows you to gain exposure to stocks of every company in an entire index.
For example, if you own an S&P 500 index fund, it means your portfolio would be exposed to all 505 stocks that make up the S&P 500 index.
Instead of looking at how each individual company is performing, investors use indexes to measure a group of them together. This gives investors a better idea of how the market is performing as a whole.
There are hundreds of indexes, but only a few of them you may have seen on the news or heard your uncle talking about, those include:
- S&P 500
- Dow Jones Industrial Average
- Nasdaq Composite
Index funds are one of the best ways to invest your money if you want an investment that’s a little more passive.
If you want a little more liquidity with your investments, you can also invest in exchange-traded funds (ETFs). You can think of ETFs as index funds that trade like stocks on the stock market.
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Why are index funds good
I like index funds because they are a low barrier of entry into the stock market.
I can remember growing up and seeing pictures of Wall Street and the New York Stock Exchange. It was always so mesmerizing to me, but at the same time, it felt so unrealistic that I would ever be able to trade on the stock market.
I’m here to tell you that with the advent of index funds, this can be a reality.
You can buy entire indexes such as the S&P 500 and Dow Jones for as little as $200 and own stocks in major companies.
“By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals,”Warren Buffett
Where can I buy index funds?
Index funds are very easy to buy. In fact, you can buy them online and own stocks in major companies in a matter of minutes.
The most common way to invest in index funds are directly through a fund owner such as Vanguard or Fidelity.
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It’s also important that you take into account the expense ratio of each index fund. An expense ratio is an amount the fund charges you each year.
If you invest in an index fund with a 0.04% expense ratio, you’ll pay the fund $40 per year for every $1,000 invested.
With that said, here are some common index funds:
|Fund||Minimum investment||Expense ratio|
|Vanguard S&P 500 Index fund||$3,000||0.04%|
|Schwab S&P 500 Index Fund||No minimum||0.02%|
|Fidelity 500 Index Fund||No minimum||0.015%|
|Fidelity Zero Large Cap Index||No minimum||0.0%|
One of the best index funds to invest in is the Vanguard S&P 500 index funds. This index fund has often outperformed many private hedge funds.
It’s a perfect buy-and-hold index fund that will give you a nice return for many years to come. It’s also possible to invest in index funds through a retirement account, such as a Roth IRA or 401(k).
The advantage of using retirement accounts to invest in index funds is that your gains are not taxed.
Nonetheless, if you are looking for a more hands-off investment, then index funds are one of the best ways to invest your money.
If you want a more in-depth guide on investing, read my ultimate investing guide for beginners.
3. Brandon Turner: “Rental real estate”
90% of all millionaires and billionaires own real estate.
And that doesn’t mean they own a house that they live in. No. It means they are investing in real estate.
They own rental properties. Multifamily homes. Apartment complexes. Hotels. REITs. You name it.
Now, why would so many wealthy people want to own real estate? What are the advantages?
Here are a few of the advantages of investing in real estate:
- Passive income through cash flow
- Wealth building through property value appreciation
- Huge tax benefits
- The ability to leverage capital to build wealth
Real estate investing may not make you wealthy overnight, but it can add zeros to your net worth in a shorter timeframe than many other traditional investments.Brandon Turner
Investing in real estate is another one of the best ways to invest your money.
However, getting started can seem impossible. You may be asking yourself these questions:
- Where can I learn more about real estate investing?
- Do I need a lot of money to start?
- Do I need some type of license to invest in real estate?
- Do I have to manage the property myself, or can someone else do it?
These are all valid questions. I will provide resources for you shortly, such as books and podcasts that I would recommend you start with.
I want to invest in real estate, where do I start?
“Give me six hours to chop down a tree, and I will spend the first four sharpening the ax.” – Abraham Lincoln
If you want to start investing in real estate, you first need to spend time learning about it.
Listen, I’m all for the “jump now, look later” approach. This is great. But it’s equally as important to make sure you at least understand the fundamentals.
For example, do you know what kind of investing you want to do?
With real estate investing, it’s not enough to just go buy any home on the marketand expect to become a millionaire tomorrow. There are many different strategies, and you need to find the one that works best for your personality and risk tolerance.
Here are a few examples of the different type of real estate investing you can do:
- Buy and hold (rentals)
- Fix and flip
- BRRRR method
- Vacation rentals
- Real estate investment trusts (REITs)
Whether you are buying and holding real estate for rental income, buying houses low and selling them high for big profits, or using the BRRRR strategy to leverage your money, you have to make sure that you know what you are getting yourself into.
Nonetheless, real estate investing is one of the best ways to invest your money.
Where can I learn about real estate investing?
There are several books and podcasts that I would recommend.
Best books on real estate investing
- How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started
- The ABCs of Real Estate Investing
- The Book on Rental Property Investing
- Buy, Rehab, Rent, Refinance, Repeat: The BRRRR Rental Property Investment Strategy Made Simple
- Rich Dad Poor Dad
Best podcasts on real estate investing
The BiggerPockets podcast is the only real estate investing podcast I’ve personally ever listened to.
I’m sure there are other great podcasts out there, but BiggerPockets is the best.
Do I need a lot of money to invest in real estate?
The answer to that question is a big no. In fact, many real estate investors started with close to nothing. There are a few different strategies you can use to invest in real estate with little money.
For example, you can invest in REITs which allow you to own pieces of real estate without any of the hard work.
You can leverage other people’s money. It could be the bank’s money. A private lender. A family member or friend.
There are dozens of different strategies that you can use to leverage money to build your wealth. This is commonly known as good debt.
Good debt is a type of debt that is used to grow or generate income.
Real estate investing is one of the best ways to invest your money. It’s the reason so many millionaires use it as a wealth builder, and you can too.
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4. Chris Hogan (of Dave Ramsey): “Roth IRA”
There are only two things in life you can’t avoid—death and taxes.
That is unless you have a Roth IRA.
“…a Roth IRA isn’t just a nice thing to have. It’s essential. Bottom line: If you qualify for a Roth IRA, you need one!“Chris Hogan
A Roth IRA is a type of individual retirement account that allows tax-free growth and tax-free withdrawals in retirement.
You are allowed to make yearly contributions up to $6,000 ($7,000 if you are 50 or older).
I do want to point out that depending on your situation, a different retirement account might be better for you, such as a 401(k), a traditional IRA, a SEP IRA, or a self-directed IRA.
Also, understand that although each retirement account has slightly different rules and benefits, many of the concepts we will talk about will be similar for any retirement account.
For example, Roth IRAs have income limits. If you make over a certain amount of money each year, then you are no longer eligible to make contributions.
I suppose the IRS doesn’t want to lose out on any of your high taxable income. In this case, a traditional IRA may be better for you, or if you are a business owner, a SEP IRA.
How do you make money in a Roth IRA?
Think of a Roth IRA (or any retirement account) as an empty taco shell.
No one (I hope) eats tacos with just empty taco shells. You’ve got to put stuff in it!
Meat. Cheese. Diced tomatoes. Sour cream. Taco sauce. Lettuce. You know, taco stuff. Once you’ve added all your taco stuff, you’ve got yourself a tasty taco fit for a king.
A Roth IRA (or any retirement account) works the same way. When you first open your Roth IRA, it will just be an empty account.
If you want to really see your Roth IRA grow, you have to add investments into it.
Index funds (meat). ETFs (cheese). Stocks (diced tomatoes). Bonds (sour cream). And other investments (taco sauce).
You are making yearly contributions to your Roth IRA. And within your Roth IRA, you have various investments that are growing, working for you, and earning you money.
This means by the time you are retirement age, depending on when you started making contributions and investing in your Roth IRA, you could potentially have millions of dollars saved although you only contributed a few hundred thousand.
This explosive growth is because your investments were growing and working for you thanks mostly to the power of compound interest.
And the best part of it all? When it comes time for you to make withdrawals from your account, none of it will be taxed.
Okay, so other than potentially making you want tacos for dinner tonight, do you understand?
Let’s do a quick recap.
- A Roth IRA is not an investment in itself.
- Instead, it acts as a container that holds your investments and allows you to receive tax-free gains on your investments within your Roth IRA.
Where can I open a Roth IRA?
The answer to this question can change depending on how you want your retirement account managed.
Do you want to manage the account and the investments you make?
Then you should probably open a Roth IRA with a broker such as:
Do you want some else to manage the account and the investments?
Then a robo-advisor will be ideal for you. A robo-advisor is an account that is managed by intelligent computer algorithms. You can open such an account at:
Of course, there are plenty of other options. Just make sure you do your research to figure out which broker or robo-advisor will be better for your situation.
5. Jeff Bezos: “Start a business”
This one may seem obvious. But starting a successful business is the way many millionaires and billionaires earn their fortune.
Then, they use other investment vehicles like the stock market and real estate to further grow their fortune for generations to come.
Take Jeff Bezos for example. You know, the founder of Amazon, the company almost worth one trillion dollars.
Bezos’ started Amazon 25 years ago in his garage.
Bezos himself has a personal net worth of over 100 billion dollars.
Do you think you can build a 100 billion dollar net worth in 25 yearsinvesting your money into a mutual fund or CD at your local bank? Never.
This type of growth is only possible if you are the founder of a successful business.
I’m not saying that you have to start a business that is worth 1 trillion dollars in the next 25 years (or maybe I am? Go for it, seriously!)
Perhaps you just want to earn an extra $300k per year by starting a blog or selling an ebook.
$300k/year is certainly not a small sum and would drastically change how your life looks, right? Go do it!
Deciding what type of business you want to start
“…pick something you’re passionate about. That’s the number one piece of advice that I’d give to someone that wants to start a company or start a new endeavor…”Jeff Bezos
There is no right answer to this. Deciding what type of business you want to start is completely up to you.
But I can help by giving you a framework. First, answer this question: What do I spend the most time thinking and/or talking about?
If your answer is nothing, then I urge you to think a little harder. Whatever you decide, make sure you do something that you have a passion for.
Passion is the driving force behind success.
If you don’t have the passion it will be easy to give up on your business when the times get tough. And times will get tough.
Next, decide what type of lifestyle you’d like to have.
- Do you want to be able to travel and work on your business from anywhere in the world?
- Do you see yourself having an office with employees?
Deciding on your desired lifestyle will help you decide the type of business you want to start.
If you want to be able to sit on the beach with your laptop and work on your business, then you’d likely want to start an internet company.
The final question I want you to ask yourself when deciding on what kind of business to start is: what would I be willing to do for free?
Because if you’re willing to do it for free, that means you really have a passion for it. And since you have a passion for it, starting a business around that passion will much easier than starting a business around something that you aren’t passionate about.