How to retire rich 101
How to retire rich 101
Created by Pranav Garg / @pg2286
Why do you care?
Time
Loosing time and the power of compounding which does heavy lifting.Social Security
In it's current state would not last beyond 2033.
Is this blessing in disguise?
Yes. One now have the flexibility to decide investment amount, when and where to invest.
Major hurdles in saving
Fear
What about if I lost everything like what happened in 2008 or dot com burst. I don't have enough. (Check if you are buying things you want or you need) I have lot of time to do planning.
Consistency
Dont know much to devote time in research. Being consistent about contributing helps in averaging and also helps us to remind that we stay on schedule with the commitment. You will not be able to find out the best fund which will make your overnight rich.Other hurdles
Can some be someone would like to share their experience, whats preventing them from saving right now.Investment options
High Liquidity - More popular
- Equity (also known as stocks)
- Bonds (also known as treasury bills)
- Money Market or savings bank account
- Mutual Funds
Low Liquidity - Less popular
- Antiques & Collectibles
- Real Estate
- Micro financing
One approach
Confused?
Don't worry we will go over it in a minute.
What's a Mutual Fund
A company who invests in buying stocks/equities or bonds of publicly traded companies on S&P or other indices. As a consumer one just buy shares of these companies.
Whats a bond?
In simple terms its an I-Owe-yoU agreement between two parties. Is regarded less risky than equities.
Any questions so far?
FAQ's
So how much one should save?
25 times your annual salary or atleast 1 million.
How much should I save from my paycheck?
Atleast 20% from your paycheck.
When one should start investing?
As early as possible, so one can harness power of compounding.
Investment Ratio?
% of stock investments = 100 - Age Stocks provide more growth however but they are also volatile.
FAQ's continued...
How much money can I save?
$17500 (401k/403b) and $5500 (Roth/Traditional IRA)
Difference between (401k/403b) and IRA?
(401k/403b) are offered by employers usually and sometimes they give free money away.
Traditional IRA vs Roth IRA ?
Always opt for Roth IRA as one doesn't pay taxes on future earnings.
What does diversifying means?
Buying a combination of stocks, mutual funds and bonds.
Warren Buffet Quotes
ON SAVINGS:
“Do not save what is left after spending, but spend what is left after saving.”On investment
“Do not put all eggs in one basket.”On Earning
“Never depend on a single income. Make investments to create a second source.”Helpful Links
Thanks Everyone
Happy Investing BY Pranav Garg
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