Take a hard look at your money. Are you making enough from your investments? Do you wish you could earn just a little bit more?
If you do (don’t we all?), then it’s most likely because you’ve been investing all wrong. According to Stastica, the recent recession had 60% of people saying they might have to delay retirement due to losses in their investments.
What’s even more shocking is that even though Americans have investments, 35% of people over 65 years old still have to rely on Social Security as their main source of income.
Need more proof? For people who started working at 25, only 4% would have enough for retirement by the time they are 65 years old.
So what can you do to beat the statistics?
It’s simple: learn what you’ve been doing wrong with your wealth building strategy and start doing things that work. That means you need to focus on the process of investing, not the type of investments you should purchase.
Is it really that simple?
Yes, according to Todd Tresidder, owner of personal finance site Financial Mentor. He was one of the early pioneers of statistical mathematical risk management and market-timing methods. He ran a hedge fund business and “retired” at the age of 35 when he sold his business in 1998.
Because of his expertise of wealth building, many people came to him for advice. What he found was that many assumptions people had about how investing and wealth building had were false.
So what is wrong with the way people are investing?
Todd believes it is that people think finding a “good” investment will be the answer to building wealth. If you want to be a successful investor, you need to treat it as a process. In other words, you need to find a way that will ensure you don’t make bad investments and keep you in good investments.
It means you need to look at risk management just as much as what investments you choose to put in your portfolio.
Todd stresses that, “Investing done right is embracing an investment process that is repeatable, and that you can implement for decades in the future, or for a lifetime. That process must have a provable, positive mathematical expectancy based on historical research. You have to be able to identify a plausible source of return for that expectancy and understand that it will carry forward into the future.”
What Todd refers to as mathematical expectancy is what determines the compound in your portfolio. It is the average amount of money you can expect to gain (or lose) per dollar at risk.
The idea is to ensure that not only do you make money, but how to get yourself out of a potentially bad situation in order to protect your assets. Expectancy depends on various factors such as the percentage of time you make money, commission costs, how often you invest, and the size of your profits versus your losses.
Think of it as an offensive and defensive strategy. If all you do is think of making good investments, all you’re doing is looking at the offensive side. If you don’t make sure to find ways to minimize risk in your portfolio, you will have to work that much harder to build wealth if you incur losses. Getting a grasp on expectancy investing is the true key to success.
No Shortcuts to Wealth
Sounds simple, but it might not be easy. If you’re looking for a get rich quick method, then you’re in the wrong place. You will need to put in as much effort it will take to apply what you’ve learned to achieve financial independence.
“What part is going to be more important than you learning investing and understanding it? It just seems pretty straightforward that should be something that would be a priority if you have any interest in financial security,” Todd says.
Achieving financial independence is all about the choices you make. If you want to achieve wealth, make becoming an investment expert your priority. When you first start out, start with smaller amounts, until you’ve figured out a process that works for you, so you minimize losses when you make mistakes.
Most importantly, make sure you figure out why you want to achieve wealth. Todd suggests that the why is what will drive you through the difficulty. It will be hard work and if you’re not clear on your why, then it will be hard to overcome personal and professional obstacles along the way, that “you’ve got to have a deeper drive than just to make a bunch of money because that’s not a drive that’s going to sustain you.”
If you’re interested in learning more about the wealth of information Todd can provide for you, head over to his website Financial Mentor and make sure to sign up for his mailing list where you can get special discounts, including his upcoming book on expectancy investing.