As a new investor, you need to define what your goals are. What are your goals? Do you just want a comfortable retirement? Do you want to have your dream home with no debt? Do you want to own a private jet? The answer to those questions will determine the approach you might want to take when it comes to your investment portfolio. I ask because contemporary sociologists such as Dennis Gilbert define “rich” as those who live off investments and not occupational-driven income. By this definition, a doctor, even one earning $1 million a year, isn’t as rich as someone who earned $1 million from stocks, bonds, real estate, copyrights, or other passive income sources. The reason is because the investor can sit at home and make money, while the doctor stops receiving a paycheck if he fails to go into work.
Turns Out, Most Investors Don’t Want to Be Rich
The truth is, most people don’t want to be rich. This was backed up in a major peer-reviewed study by Daniel Kahneman and Angus Deaton from the Center for Health and Well-being at Princeton University that proved money does buy happiness up to $75,000 per year. In other words, once you make $75,000 per year, your day-to-day experience doesn’t improve very much as your income grows. Your “life satisfaction” does – that is, how you feel about what you’ve accomplished. The degree to which you love your work is icing on the cake. It seems rational that most new investors should focus on how to earn that much each year, if they don’t already.That means that a successful investing program is one that is designed to help you:
• Live debt-free. If you have no debt, you can’t go bankrupt.
• Avoid financial stress by having diversified, high-quality investments that provide you with the lifestyle you want.
• Maintain adequate insurance coverage so you don’t have to worry about losing everything if something goes wrong.
• Have diversified income sources so you don’t rely on a single job or source of income that could put your family at risk if it disappeared overnight.