Can you really get rich as a lazy investor?
Mr. Bean was at work the other day and overheard 2 of his coworkers chatting.
One coworker, we’ll call him Ben, is an avid reader and has been studying and trying his hand at day trading, like Mr. Bean, for the last year or so. He spends hours each day, trying to master his skills.
The other coworker, we’ll say, Jerry, has not read a book since high school. Jerry would rather spend his evenings and weekends playing video games or hanging out at the beach than reading or studying current market trends. There is absolutely nothing wrong with this, everyone should be free to spend their free time however they enjoy.
Jerry, knowing Mr. Bean and Ben discuss day trading on a daily basis, came over to Ben and started saying that he wants to start making some extra money. “Day trading sounds like quick and easy money, what should I invest in?”
“OMG, no. Please don’t think like that.”
So many people on the internet say how easy it is to make money doing this side hustle (check out my article Hustle or Hassle), or investing in this industry or that. It is easy to believe that anyone can just throw a few dollars into a simple investment and get rich!
But as much as we’d all love to believe that, it’s just not that simple.
Most Investments are Not for the Lazy Investor
Real Estate Investing, Starting a Business, or Day Trading are all great ways to make money and build wealth, IF you’re willing to put in the time, effort, and financial backing to make them work.
Each of these industries requires a significant amount of time learning and studying the trade.
Real Estate Investing
Real Estate Investors need to be able to choose the right neighborhoods and home types. They need to find access to the funds required to purchase, update, and maintain the property. Even with a property manager, they still have to deal with tenants and maintenance, even if from afar. (Check out my article on BRRRR Investing)
If these things are done correctly, Real Estate can make a good investor a millionaire in just a few years. But if done poorly, potential investors can be out thousands of dollars and possibly in bankruptcy, in just a few months.
Small Business Owners
Small Business owners need to know how to run their businesses. They need to learn marketing, Human Resources/payroll if they have employees, and accounting; or at least figure out how to outsource it. And there are often start-up costs, it could be as little as the price of web hosting or the purchase of MLM startup kits, or as much as renting space and purchasing inventory.
If you absolutely love your business and can successfully build it up, a small business can make you incredibly wealthy. But considering over 60% of restaurants fail within their first year, and 80% in 5 years, building your own successful business is no small feat. It’s a lot of work!
Day Trading
Day Trading is often thought to be a way to get rich quickly, but it is also one of the most dangerous ways to invest. The stock market is unpredictable. If a trader does not know what they’re doing, they can lose thousands of dollars in a few seconds! It takes a lot of studying to learn how to read market trends and make successful trades. Even pros make bad trades on the regular.
Day trading is not the quick and easy money maker that so many influencers make it out to be. The recent adaption to apps like Robinhood and Webull, make trading so easy, anyone can do it from anywhere. But unless you’re willing to put in the time to actually research the companies and market trends you’re looking to trade-in, don’t be fooled into thinking you can easily get rich quick.
For people like Jerry, who want to build wealth, but don’t want to put in the extra effort to spend hours upon hours to really learn about their investment strategy, there are other, simpler ways to reach financial freedom. But just like with these investments, it will take some time, just not nearly as much effort.
Lazy Investor Money Maker #1: Pay Off Debts
While Jerry was out there willing to throw a few hundred dollars into the stock market each month and hope for the best, he currently has a large car loan on his 2-year-old truck, building interest.
If you’re like Jerry and want to get the most bang for your buck without a lot of work, take a look at your current financial situation.
Do you have credit card debt? Car loans? Student debt? Personal Loans or HELOCs?
By taking that extra “investing” money and putting it towards paying your high-interest debts off faster, you are essentially earning that loan’s interest rate back.
If you have a 7% interest rate on your car and you pay an extra $200 towards the principle of the loan each month, you are saving yourself 7% interest on that $200, every month!
If you’re putting that $200 towards a credit card bill with 24% interest, that’s a 24% return on your money! Not too shabby!
That’s a pretty good return, and it’s guaranteed. And all you had to do was make an extra payment. No research was involved.
(Check out my Article on Paying Off Debt)
Lazy Investor Money Maker #2: Concentrate on Your Retirement Investments
Employer Match
Whenever someone asks me what the first step they should take towards a financially secure future is, other than spending less than your earn, my answer is always to make sure you are getting your employer’s match.
If you have access to a 401k, TSP, 4013b, or any other type of employer-sponsored retirement account at work, make sure you are putting in at least enough to get the match.
That is part of your salary. Your employer plans to pay that to you and if you don’t contribute your portion, they get to keep theirs. That’s just saying you prefer the salary cut. “No, thank you, I don’t like receiving my whole paycheck.”
Any money you save in your 401k that is matched by your employer immediately earns a 100% return! If you have this benefit, make sure to take it!
Employer-Sponsored Retirement Plan
Even beyond your employer match, saving in your employer-sponsored retirement account is usually the easiest way to build wealth.
Choose some total stock and/or bond index funds or target-date index funds if you prefer, and have HR automatically put that money in there for you every check.
You never have to touch it or even think about it. Just save up, automatically, for as long as you’re with the company.
IRAs and Roth IRAs
Suppose you don’t have an employer-sponsored retirement account or the account has excessive fees. Or maybe you want to contribute more towards retirement than is allowed in the plan, make sure to open and contribute towards your Individual Retirement Account (IRA).
As of 2022, you can contribute up to $6,000 a year to your IRA ($7,000 if you’re over 50 years old.)
Set up automatic contributions every paycheck and let the account grow automatically. Hide that money from yourself. By simply keeping it in a total stock market index fund, you can expect a 10% annual return over the years. That’s a pretty good return for simply setting up an automatic monthly deposit.
Ensure You’re Financially Stable Before Investing
Before jumping into significant or exciting investment opportunities, ensure that you are financially stable first by checking where you are on your Path to Wealth:
- Emergency Fund
- High-Interest Debt Paid Off
- Expected Expenses
- Retirement Funds
If you feel that you are on financially stable ground and are ready to jump to the next level of investing, take your time to plan for it.
Prepare for Future Investing
When you feel that you’re ready to make the jump to the next level of investing, make sure you are fully prepared.
Begin by setting aside the extra money you plan to use on a regular basis.
Do you want to start day trading? Buying Rental Properties? Start a Business?
Figure out how much you can put aside each paycheck (after all of your other financial obligations, including savings, are fulfilled) and start saving. (Where to put your savings, depending on when you need it.)
Take a few months a build a nice balance to work with.
While you’re building your investment finances, begin deep diving into your potential industry.
Learn the tricks of the trade, how to be a successful investor, and what all it will take. Make sure you are willing to put in all the work and effort to make your investment options a success.
Read books. Watch videos. Take classes. Find a mentor who is already successfully doing what you hope to achieve. Do whatever you need to do to really understand and hopefully be successful yourself.
In the end, you may decide that you prefer lazy Saturday mornings playing video games or hanging out at the beach to researching and becoming an expert in your desired field.
If building a new business, real estate empire, or day trading profession is just not what you want to spend your time doing, you can still relax on that beach knowing that your debts are gone, your retirement is covered, and you’ve got a nicely padded savings account, all with almost no extra effort.
Wrap-Up
Get rich quick ideas are all over the place. Some are complete scams but other just requires far more work than most people are willing to put in to really be successful.
If building a successful business, real estate, or trading empire is your dream, go for it! Put in the work! Ensure your finances are stable and go for it.
But if you prefer being a lazy investor and really want the most bang for your buck, quit trying to get rich quick and go for the easy financial wins first.