I Will Teach You to Be Rich: No Guilt. No Excuses. No B.S. Just a 6-Week Program That Works.

by Ramit Sethi

Wish to build discipline of long-term investing, like an adult.

I urge you to combine a classic low-cost investing strategy with automation.

It involves spending most of your time choosing how your money will be distributed in your portfolio, then picking the investments (this actually takes the least amount of time), and finally automating your regular investments so you can sit and watch TV while growing your money.

You pick a simple investment plan that doesn’t involve any sexy stocks or guessing whether the market is going up or down, and then you set up automatic contributions to your investment accounts.

For example, in October 2018, the stock market dropped and one of my investment accounts decreased by more than $100,000. I did what I always do—kept investing, automatically, every single month.

if you’re investing for the long term, the best time to make money is when everyone else is getting out of the market.

Automatic investing may not seem as sexy as trading in hedge funds and biotech stocks, but it works a lot better. Again, would you rather be sexy or rich?

As Warren Buffett has said, investors should “be fearful when others are greedy and greedy when others are fearful.”

When people say investing is too risky, it’s because they don’t know what they don’t know.

That was a powerful moment. And it’s an example of the crossover point, where your investments earn enough to fund your expenses—automatically.

Imagine one day you woke up and you had enough money in your accounts to never work again. In other words, your investments were generating so much money that your money was actually producing more money than your salary.

Money makes money, and at a certain point, your money is generating so much new money that all of your expenses are covered.

When you hit the point of financial independence, you’re being paid to live because of decisions you made years ago.

Where you’ve earned enough that your investments will pay for your life in perpetuity

FIRE: Financial Independence + Retiring Early. Think of someone who retires in their thirties and will technically never have to work again because their investments cover their annual living expenses, every year, forever.

Earn more. Spend less. Or earn more and spend more! You decide on your Rich Life.

It’s way too easy to make mistakes, such as being overconfident about choices or panicking when your investments drop even a little.

Asset allocation is your plan for investing, the way you distribute the investments in your portfolio between stocks, bonds, and cash.

Your investment plan is more important than your actual investments.

It is important to diversify within stocks, but it’s even more important to allocate across the different asset classes—like stocks and bonds.

Your asset allocation is actually one of the most important decisions you’ll make in life—it’s a decision that could be worth hundreds of thousands of dollars to you and for some, millions.

In reality, asset allocation is one of the only things that matters, and I think you’re smart enough to learn it.

But the big takeaway here is that if we’re in our twenties and thirties, we can afford to be aggressive about investing in stocks and stock funds—even if they drop temporarily—because time is on our side.

if you’re nervous about investing and just starting out, your biggest danger isn’t having a portfolio that’s too risky. It’s being lazy and overwhelmed and not doing any investing at all.

I invest aggressively when I’m younger, and as I get older, I get more conservative.”

Extremely low cost, easy to maintain, and tax efficient.

Remember, this isn’t simple. Creating your own portfolio takes significant research.

Anyway, “dollar-cost averaging” is a phrase that refers to investing regular amounts over time, rather than investing all your money in a fund at once.

by investing over time, you don’t try to time the market. You use time to your advantage. This is the essence of automatic investing, which lets you consistently invest in a fund so you don’t have to guess when the market is up or down.

In short, most of us already dollar-cost average since we take part of our monthly paycheck and invest it. But if you have a lump sum of money, most of the time you’ll get better returns by investing it all at once.

fund. Investing isn’t a race—you don’t need a perfect asset allocation tomorrow.

you’re taking a forty- or fifty-year outlook on investing—it’s not about the short term. This is the cost of constructing your own perfect portfolio.

If you have the rest of your portfolio set up and still have money left over, be smart about it, but invest a little in whatever you want.

It’s very important to know WHY you win and why you lose.

Getting started early mattered a lot. I was extremely lucky to have a dad who pushed me to start investing early.

We all start with the cards we’re dealt. But you’ve read this book. You can move and start investing aggressively now.

Every dollar you invest today will be worth many more tomorrow.

Rebalancing your portfolio will make sure your assets remain properly allocated and protect you from being vulnerable to a specific sector’s ups and downs.

Every year, I spend a few hours re-reviewing my system and making any changes necessary.

Revisit your debt payoff plan: Are you on track? Can you pay any of your debt off sooner?

Since you presumably made a good investment, why not hold it for the long term?

I showed you how buy-and-hold investing produces dramatically higher returns than frequent trading.

Invest in retirement accounts and hold your investments for the long term.

When you’re young, there are only three reasons to sell an investment: You need the money for an emergency, you made a terrible investment and it’s consistently underperforming the market, or you’ve achieved your specific goal for investing.

Earn additional money.

Use the money in your retirement accounts. You can always withdraw the principal you contributed to your Roth IRA penalty-free,

Create an emergency fund. An emergency fund is simply another savings goal that is a way to protect against job loss, disability, or simple bad luck.

Insurance is almost never a good investment, despite what financial salespeople (or clueless parents) will tell you.

If you believe the market will recover, that means investments are on sale for cheaper prices than before, meaning not only should you not sell, but you should keep investing and pick up shares at a cheaper price.

If you think the industry or investment is simply going through a cyclical downturn, then hang on to the investment and continue regular purchases of shares. If, however, you think the industry won’t recover, you may want to sell the investment.