How To Invest Like A Millionaire
Wouldn’t it be great if you could instantly rewire your brain to invest like the super-wealthy? People often wonder what the secret is to investing like a millionaire, so here are five ways you can super-charge your investing game and start to invest like a millionaire.
Spread The Risk
Maximising your investments means minimising your risks and minimising your risks means spreading your risks. Sound familiar?
Keeping all your eggs in one basket – no matter how carefully you place them in there – is a sure-fire way of exposing yourself to potential risks and possibly devastating financial losses.
We all understand that investments work on a risk-to-reward basis, however a fundamental part of reducing these inevitable risks is by spreading your funds across a range of projects.
By following this strategy, as millionaires do, it will help reduce the risk of large capital losses and maintain steady returns within your investment portfolio.
Look out for an auto-invest option when researching and identifying investment products. It will automatically diversify your funds across a broad range of projects and it will (if you choose) re-invest your capital at the end of each loan, making your money work for you 365 days a year.
The House Crowd’s auto-invest service is super simple to use and offers a fixed annual return while giving smart investors the opportunity to protect and grow their investments even in uncertain times.
Get Out Of The Passenger Seat
Have you ever wondered why banks prefer to lend us the money to buy property rather than just buy property itself, despite having access to a huge pool of money?
Well, it’s because lending gives them two vitally important pay offs – 1.) Greater control 2.) Greater protection. These pay offs are crucial if you want to invest like a millionaire.
People are quick to forget that the property market is cyclical, it goes up and comes back down again. If you’re buying property to invest, you’re at the mercy of that market and it will take you wherever it wants you to, with you sat sweating in the passenger seat.
By investing your money into property crowdfunding platforms such as the House Crowd, as opposed to buying property, you’re positioning yourself in the driver’s seat – you hold the cards.
If there is a property market fall, the lender can force a sale and get paid out from the proceeds first.
Millionaires invest like this because it offers the perfect combination of higher rates of interest and loans that are secured against a physical asset.
He Who Understands It, Earns It. He Who Doesn’t, Pays It
Albert Einstein described ‘compound interest’ as the 8th Wonder Of The World and you’ll be amazed at how quickly it will suddenly start growing once you start earning interest on your interest. It is a fundamental concept and it will astonish you just how quickly you can increase your wealth if you keep reinvesting the interest that you earn.
For example, if you invest £5,000 over 25 years with an interest rate of 10% while making monthly top-ups of £150, your interest will have compounded to give you an overall sum of £255,170.85, that’s over a quarter of a million pounds!
If this was the only investment you ever made you’d be left with a very tidy sum of £241,869.49 and within touching distance of a quarter of a million pounds!
Why not check out this compound interest calculator to see for yourself and use your own financial situation as an example to demonstrate just how powerful the concept of compound interest can be.
Time, Not Timing
When you invest like a millionaire, it’s not the timing of your investments that is most important; it’s the length of time you give your investments. Wealth and successful investments take patience.
The mega-rich understand that it’s the time your money is spent in the market that makes the difference.
It’s natural to assume you need to time your investments. Buy low and sell high – as they say. But doing this and trying to predict these complex cycles is extremely difficult and takes many years to even begin to get a ‘feel’ for the market. Who has the time for that?
The longer you’re prepared to keep your money at arms-length and locked-in to an investment the greater the returns will be.
When it comes to investing your money wisely, it’s vital to keep your money accruing as much interest as possible, for as long as possible.
As humans, we’re heavily conditioned by society to prioritise short-term pleasure over long-term goals.
When the majority of the population receives a hefty work bonus or some significant inheritance, they will usually spend it.
You need to reframe these fortuitous moments from spending opportunities to investment opportunities.
Change your daily spending habits and move away from short-term gratification. A millionaire mindset is focussed on the long-term and on the bigger picture.
Make permanent changes to your spending habits by spending less on luxuries and investing this money instead. Delaying instant gratification will lead to a much bigger pay-off in the future and significant financial rewards.