7 Habits of Highly Effective Market Investors

What’s Poppin’,

This is the Master Money Newsletter that makes money so exciting we’ll have you doing the Ric Flair “WOOOOOO”.

Here’s what we have on deck today:

7 Habits of Highly Effective Market Investors
The book I am reading right now
How you can earn more money today.

Lets ring that cash register.

Today I am going to lay out some habits of successful investors. If you master these, odds are, you can become very wealthy.

Maybe even Scrooge McDuck wealthy, who knows?

Let’s dive in, shall we?

1/ Remove Emotion:

Emotions will destroy your investment returns. Learning to invest by controlling your emotions and sticking to the plan is the secret sauce.

Here are some emotions to consider:

Herd mentality (Wall Street Bets, Tech bubble)
Fear
Greed
Frustration or impatience
Hope (Not based on math)
Pride

But how can you control your emotions?

Build an investment plan and stick to it no matter what.
Look at your portfolio infrequently.
Remember the market’s long-term return goes in one direction.

2/ Always be Learning - Reading - Listening

Turns out the nerds in high school had it all figured out.

Warren Buffet (The GOAT Investor) attributes his success to reading 500 pages a day.

The book Rich habits found that 85 percent of self-made millionaires read two or more books per month.

Reading offers perspective and allows you to come up with new ideas. It is why I read a book per week. It changes the way you think, keeps you motivated, and allows you to learn.

Other ways to learn:

Take Courses
Listen to podcasts
Listen to audiobooks
Watch Youtube videos

3/ Automate Your Investments

Every time you get paid, set it up where your brokerage account gets an automatic transfer. Do the same with your retirement accounts.

This removes that thing that we all struggle with. Willpower.

4./ Start as early as possible

It pays to invest early and often. The longer your money can benefit from the power of compound interest, the bigger your gains will be as time goes on.

5./ Time in the market beats timing the market

Study after study over the years has shown that “market timing” does not work and that “time in the market” is the way to go.

Why you should not time the market:

A/ You remove emotions.

B/ Investors Are Poor Market Timers: According to Dalbar’s 2015 Quantitative Analysis of Investor Behavior study, the S&P 500 had an average annual return of roughly 10% during the 20-year period ending Dec. 31, 2014. During the same time frame, the average investor experienced an average annual return of just 2.5%.

C/ Lower Capital Gains Tax Rate: An investor who sells security within one calendar year of buying it gets any gains taxed as ordinary income. Depending on your adjusted gross income, this tax rate could be as high as 35%. Long-term investors are taxed less.

6/ Keep Fees Low (The Big one)

Fees are your worst enemy. They will stunt your wealth-building growth.

The higher the fees the less you take home. In fact, avoiding fees is a million-dollar decision homie.

Let me show you why.

From 1926 through 2019 an 80% stock and 20% bond portfolio returned 9.7% a year.

Let’s imagine we invest $1,000 a month over a 40-year career. That portfolio would grow to about $5.8 million.

Yes, compounding is a beautiful thing.

Let’s now assume we pay an advisor 1% of our investments for their services. That’s a standard fee in the industry (although you can find less expensive and more expensive advisors).

The result is that on an after-fee basis, our returns drop from 9.7% to 8.7%. The result is a portfolio of just $4.3 million. The one percent fee cost us about $1.5 million, or 25% of our wealth.

Fees matter.

7./ Take every tax advantage you can

Uncle Sam wants a cut of your big bankroll. The best way to lessen the blow is with retirement accounts.

Traditional Brokerage accounts work like this. You make money from your investments then you’re required to pay capital gains taxes any year you realize a gain (realize is a fancy way of saying sold and profited).

But for each year you pay taxes on your gains, you’ll have less money left over to keep investing.

Tax-advantaged retirement accounts (401K) work like this. With the traditional version of either account, earnings on investments aren’t taxed year after year. Rather, they’re taxed during retirement, when the time comes to start taking withdrawals.

Here is what would happen if someone invested $6,000 per year into a taxable brokerage account vs. a 401(k) tax-advantaged account:

Someone who only invests in a taxable account at the end of 30 years would have $906,969

Someone who only invests in a 401(K) account at the end of 30 years would have $1,416,373

Isn’t it crazy that choosing the right account can make a $500K difference?

High Performance Book Club 📚

I get a ton of questions from listeners and readers as to what I am reading. So we decided to let you know via the newsletter. The High-Performance Book Club will be a way to share this. If you want to be Elite in your career, business, or with your wealth, then welcome to the club.

This week I am re-reading my favorite book from last year.

$100M Offers By Alex Hormozi

If you want to see all the past and future book club books, they will all be here. This is #1.

10-second tip of the week ⏰

If you are looking to earn more money fairly quickly, check out Upwork to see if you can use your skills to earn more in your free time!

Podcast 🎙️

The Step-By-Step Framework to Making 6 Figures Per Year

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