Investing is not complicated. It’s one of the areas of life where the simpler you make it, the better the result. But, many people do extra because they want to earn a higher return. And they usually end up learning their lesson the hard way.  

Index investing doesn’t get the attention it deserves. Why? There is a trillion dollar financial services industry that tries to make investing seem complicated so they can make you pay them high fees for the rest of your life in exchange for their guidance. They want to make the highest profit possible so they promote things that are complicated because those products have the highest fees. They push things like expensive actively managed funds, annuities, cash value life insurance, and other products that will drive their profit at the expense of your wealth building. 

The formula to build massive wealth is only as complicated as we make it. At the simplest level, focus on earning a higher income and saving a good chunk of it. Plow the savings in low-cost index funds. Keep doing this over and over again and let the power of compounding do the work for you. 

We used a 10% annual return for Mel who invested in index funds over the last 30 years. (The actual annualized return for the S&P 500 over the last 30 years is 10.3%). For Moe, we used a 3.6% annualized return to represent the typical investor’s returns. This number is from JP Morgan’s annual calculation of what the typical investor earns per year. 

As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.‎

‎-Vivi & Shane

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