investing for beginners

Investing money to build wealth is very important on the path to becoming financially successful. If you’ve waited a long time to start, don’t worry. There is always time for you to start investing money for your financial future.


Want to hear a scary statistic?

Almost half of all adults in the United States 55 and over have nothing saved for retirement.

It can be easy to prioritize other financial goals over retirement when you’re young, because retirement seems so far off.

Unfortunately, before you know it, retirement will be here – and you’ll either be able to pay for it or you won’t.

While this is a heartbreaking statistic, if you’re in the same boat, there’s good news; it’s never too late to start investing for your financial future – you just have to be more diligent about it if you’re starting later.

In this post, you will learn about the power of compounding and compound interest, and learn why it’s never too late to start investing for your financial future.

investing for beginnersWhat is Compounding and The Power of Compound Interest

Before we get into some tips on how to save more to invest for retirement, it’s helpful to see an example of just why it’s so important to start investing as soon as possible.

Two words – compound interest.

Most people are familiar with the term interest – the money you get in return for loaning money to a bank, for example.

But compound interest is an even greater being.

Compound interest is the money you earn on your initial investment, plus the money you earn from accrued interest.

Simply put, it’s the interest your interest earns.

For example, let’s say you put $1000 into the stock market, and you average a 10% return every year. After that first year your investment gained 10%, or $100.

While this is an amazing thing – yay, free money! – even better is what happens a few years later when compound interest starts taking over.

Let’s see how it affects your investment using a compound interest calculator from the IRS website.

After 10 years, you would have earned a total of $1,593.74 in interest without contributing anything more.

You can see how during the first few years, our investment returns don’t make us much.

But once compound interest starts to take over, it really starts to take off!

Even with an amount as small as $1000, over time, the interest you earn from your investment and the interest your interest earns really starts to affect your returns.

This is why it’s so important to start investing early – because compounding takes time.

The point of this example isn’t to make you feel bad – it’s to help you understand how much compounding interest can help you reach your financial goals.

The Impact of Time on Compounding and Time in the Market

Another important factor when it comes to investing is time. Time allows compounding interest to do the heavy lifting for us.

In order to drive the point home, let’s look at an example between two different investors: one with 15 years until retirement, and one with 25, with identical salaries, investment returns and contributions.

Investor A makes $50,000 a year, invests $100 a month, and has 15 years until retirement.

Here’s how much his account would be worth after that 15 years at 10% interest:

These investing results are pretty good!

Let’s compare that to investor B, who also makes $50,000 a year, invests $100 monthly, but has 25 years until retirement.

Here’s how much his account would be worth after that 25 years at 10% interest:

Even with both investors making the same amount of money, and contributing the same amount to their investments, investor B has almost three times the amount of money as investor A after only 10 additional years of investing, and only $12,000 additional capital invested.

This is a perfect example of why time in the market is more important than almost any other factor.

How to Save for Retirement with Limited Time

Let’s say you’re like Investor A, with not much time until retirement.

Is it even possible for you to retire with enough savings?

The easiest way to determine if and when you can retire is to determine how much you’ll need in retirement, then divide that amount by the amount of years you have until you retire.

For example, let’s say you are 50 years old and expect to retire at 65 with $500,000. You have no money saved and you don’t have access to a 401K.

In order to determine how much you’ll have to save for retirement, we have to figure out how much we need to save per year.

$500,000 / 15 years = $33,333.33 a year, or $2,777.00 a month.

That is a lot of money, but depending on your income and expenses, it can be done.
But in order to do that, you need to start saving more.

If you’re trying to play catch-up, here are some small steps that can yield big results.

The Impact on Retirement of Getting a 401k Match at Work

If you have an employee-sponsored 401k and you work for a company that will match your contribution up to a specific dollar amount, you need to take advantage of it.

Every dollar helps, and not taking a match is like throwing free money away.

Taking that match, whether it’s 2% or 5%, can have a drastic effect on your investment returns and timeline.

Let’s use an example.

Investor A makes $50,000 a year, has 25 years until retirement, contributes $125 a month to his retirement but gets no additional match from his company.

Investor B makes $50,000 a year, has 25 years until retirement, contributes $125 a month to his retirement and gets a match on his 401K contributions (an additional $125 a month, $250 total contribution).

Let’s take a look at the results:

Investor A:

Investor B:


While it’s not unsurprising that Investor B has more money at retirement, it is crazy to see how much more he has, just from an additional $1,500.00 being contributed to his account every year.

Obviously, if you’re getting any sort of match at all, you need to take it!

Increase Your Contributions Every Few Years (or as Often as you Can)

Another great way to beef up your retirement savings is to increase your contributions as often as possible.

Here’s an example.

Investor A contributes $125 a month to his retirement and does not contribute any extra over the course of his 25 years until retirement (and receives no company match for simplicity sake).

Here’s what he would be left with at the end of those 25 years if he started from $0 at a 10% interest rate (this is the same table from above):

Let’s contrast that to Investor B, who also contributes $125 a month to his investments, but who, every five years, increases his contribution rate by 2% (for the sake of this example, Investor B gets no company match either).

So at age 40 he’s contributing 3% ($1,500 per year), at age 45 he’s contributing 5% ($2,500 per year), at age 50 he’s contributing 7% ($3,500 a year), at age 55 he’s contributing 9% ($4,500 per year) and at age 60 he’s contributing 10.5% ($5,250).

*Because this information is harder to calculate by graph, I did it by hand.

Here are the results:

Investor B is left with almost $350,000 more dollars in retirement, just by gradually increasing their contribution rate over 25 years.

This is a perfect example of how contributing a little extra every month every few years will get you to financial independence much quicker than not raising your contributions at all.

After 50, You Can Contribute More to Retirement

You may not know, but if you’re over 50, you can actually contribute a little extra to your 401K and IRAs.

In 2019, the maximum contribution for a 401K is $19,000. If you’re over 50 though, you can contribute an extra $6,000 per year, for a total of $25,000 a year!

In 2019, the maximum you can contribute to an IRA (either Traditional or Roth) is $6,000, plus an additional $1,000, for a total of $7,000 a year.

This little extra contribution room can help bridge the gap between what you have currently saved, and what you might need.

Save, Save More, and Keep Saving!

If, and when, you get a raise, pretend you didn’t and take the extra to increase your contribution.

If, and when, you get a tax return, pretend you didn’t and take the extra to increase your contribution.

If, and when, you sell things around the house, pretend you didn’t and take the extra to up your contribution.

If you have a side-job and are earning some extra income, pretend you’re volunteering instead and channel those funds into an IRA and get the benefit of no tax when you withdrawal at the time of retirement.

For hourly employees, if and when you get overtime pay, pretend you didn’t and take the extra to increase your contribution.
If you ever receive an inheritance, pretend you didn’t and increase your contribution.

If you receive a settlement, take as much of those funds after you pay lawyers, and other bills to increase your contribution.

If you’re still trying to catch-up and have maxed out your 401k ($19,000 or $25,000 for employees 50 or over) and IRA ($6,000 or $7,000 for employees 50 or over), just remember that you can always contribute after-tax dollars to a brokerage account and purchase one of many low cost index funds.

It’s Never too Late to Start Investing

It’s never too late to start investing and contributing to your financial future.

While it may be more difficult for you depending on your age, your income, and your access to benefits such as a 401K, with time, it can be done.

There’s a wonderful Chinese proverb that is relevant to starting to invest:

“The best time to plant a tree was 20 years ago. The second best time is now.”

So start contributing to your financial well-being today, and get on the way to financial freedom.

The future you is depending on it!

Becoming a successful investor starts with having the right mindset. By cultivating a strong investing mindset, you can be prepared for tough investing scenarios and put yourself in better situations for financial success.

6 Investing Mindset Tips to Cultivate Investing Discipline

Having the right frame of mind is imperative when it comes to investing, whether you’re a battle-hardened day trader or a total investing beginner.

Possessing the right frame of mind can save us from making mistakes, from going against our own plans, and from sabotaging our success.

While it’s true that we can’t control the markets, we can control how we invest in it, and much of that is influenced by our mindset.

If you’re new to the world of investing, here are six mindset tricks you should know to help you succeed in the stock market:

  • Have a Financial Plan in Place
  • Stick With Your Financial Plan
  • Leave Your Emotions at the Door
  • Focus on the Big Picture
  • Set it and Forget It
  • Don’t Chase the Next Big Thing

Let’s get into each of these investing mindset tricks in more detail.

Investing Mindset Tip #1: Have a Financial Plan in Place

It is absolutely critical to have a financial plan in place when you’re investing in the stock market.


Because, depending on how the market is performing, what you should do and what you’ll actually do are two very different things.

Nobody knows how they’ll react to a sudden market swing (no matter the direction), and the markets are fickle.

Having this plan in place can help keep you on track, even when things don’t feel right or aren’t going well.

Conversely, without a proper plan, it can be difficult to know where you’re going, and if you’re actually following your investment principles or just chasing the biggest returns or latest fad.

To craft a financial plan, you should:

  • outline your investment goals
  • determine how much you plan to invest and when
  • define your risk tolerance
  • devise how you expect to reassess your plan through time and
  • assess if there are any limitations in your plan

Having a financial plan will also make you impervious to following dumb advice – whether that’s from the news, your favorite pundit or your boss.

With a solid plan in place, no matter what the market is doing, you should be ready to weather anything the market throws at you.

Investing Mindset Tip #2: Stick with Your Financial Plan

Almost as important as having a financial plan at all is sticking to that plan.

While there are many different ways to invest, including valuation-based investing, dividend investing, index investing, etc., oscillating between a number of different approaches willy-nilly will only waste valuable time and money.

Changing investing strategies frequently is a form of timing the market.  Timing the market refers to making buying or selling decisions of financial assets by attempting to predict future market price movements.  In essence, you’re guessing.

Very few people are good at this.

Once you’ve found a way of investing that you’re comfortable with, stick with it.

Investing Mindset Tip #3: Leave Your Emotions at the Door

If you had investments during the 2008 recession, you probably remember the sinking feeling you got after seeing your portfolio get chopped in half.

Oof – that doesn’t feel good.

Unfortunately, this same feeling was used by many investors as a justification for getting out of the market.

While this may have secured their portfolio from losing any additional money, it also meant they missed out on the bull run from 2009 until now – losing out on an over 194% gain.

Conversely, when Bitcoin was on a (quite ridiculous) rally during 2017, people flocked to get a piece of the pie before it went belly up, with many people purchasing at the top for fear of missing out.

In both situations, instead of acting based on their investment plan, people acted based on their emotions – and some people paid dearly for it.

The point is, our emotions affect our behavior. They cause us to second guess our decisions, to take bigger risks than we can afford, or to cash out because we’re afraid of losing all our money.

In short – emotions hold us back.

Emotions have no place in investing. Leave them at the door where they belong.

investingInvesting Mindset Tip #4: Focus on the Big Picture

Another thing to keep in mind when investing is to focus on the big picture.

When you’re a newbie investor, it can be difficult to not watch your investments every day – especially if they’re not doing well.

But focusing on how a stock is performing in the short term doesn’t really tell us anything.

In fact, laser-focusing in on the day-to-day performance of a stock can cause us to make decisions based on our emotions (which we already know is bad).

While every stock goes through periods of volatility, over the long-term, the stock market generally moves in an upward trend.

By staying focused on the big picture, it’s easier for us to shrug off poor performance or volatility, because we know we aren’t planning on selling for a long time.

If you’re planning on holding onto your stocks for many years, then the day-to-day performance of a stock shouldn’t matter – focus on the big picture.

Investing Mindset Tip #5: Set It and Forget It

Another attitude that should be kept in the forefront of your mind when you’re investing is the “set it and forget it” mindset.

While many new investors think that investing is a heavily involved process, with a constant buying and selling of stocks to lock in profits, or the tweaking of their portfolio until it’s perfect, this couldn’t be further from the truth.

In fact, when it comes to investing, many times the best strategy is to do nothing at all.  Simply buying stocks from good companies and holding onto them indefinitely is a great way to become wealthy.

When we constantly fiddle with our portfolios in an attempt to increase our returns or minimize our losses, a strange thing happens – we actually perform worse than if we had just left the portfolio alone!

Simply buying and holding quality stocks over the long term is practically guaranteed to build your wealth.

investing wiselyInvesting Mindset Tip #6: Don’t Chase the Next Big Thing

It’s easy to get caught up in the wave of excitement when the next big thing comes along, like cryptocurrencies.

You see people making big money, and you want to get in on the action!

And while it can definitely be argued that many of these speculative investments offer big rewards, the risks associated with them often outshine that.

Many of these investments are loosely regulated, offer little to no protection for consumers, and are subject to manipulation by whales (investors who artificially inflate a stock’s price).

There is certainly big money to be made – but it’s likely not going to be made by you.

Chasing the next big thing in the hopes that it’ll reward big is a sure-fire way of losing your shirt.

Concluding Thoughts on Cultivating a Strong Investing Mindset

Investing for the first time can be scary, but that doesn’t mean you should avoid it.

By utilizing these investment mindset hacks, you can prepare yourself mentally for what’s coming ahead – helping to alleviate some of the fear that keeps people from investing.

Hopefully this article will help you on your path to building wealth and learning more about the markets and investing.

6 Investing Mindset Tips to Cultivate Investing Discipline

There are so many different ways to invest. As a beginner, it can be a daunting task to try and figure out what investment accounts make sense. This post is a guide for beginners to help you learn about the different investment accounts for your money.

Getting into investing can be intimidating with all the different options out there. Not only are there different investment choices; there are also many different types of accounts to put money into.

With all these overwhelming choices, how do you know which are the best investment accounts for beginners?

First things first, you need to figure out what your investing goals are. What are you putting away money for?

Secondly, you need to know what options are out there, and what each account is best used for.

Finally, you can put together some simple contribution strategies for making the most out of your investments and reach your goals in the best way possible.

Disclaimer: I’m not a financial adviser or financial professional. Please do your due diligence and research before buying or selling financial securities and assets.

money makingBefore investing, what are your investing goals?

You need to determine your goals before you decide which of these investment accounts to prioritize. You also need to tally up the current state of your portfolio if you have any of these accounts already open.

What are you investing for?

Are you investing for retirement? Maybe you’re saving up for that home down payment?  Or, perhaps you just want to build financial wealth in general.

The first piece of advice is to not get tunnel vision.

Odds are, you have more than one goal, and you should be contributing to them all.

The main purpose is to determine which one to prioritize to obtain the maximum financial benefit.

First, take a look at all the investment accounts available to you. Then, we’ll discuss investing strategies.

Types of Investment Accounts

There are two broad categories of accounts. The first is Tax Advantaged Accounts, which are designed to encourage saving for retirement or other goals. The second is Taxable Accounts, which have no restrictions, but unfortunately are fully taxable.

Let’s dive into some more information on each of these different types of investment accounts.

Tax-Advantaged Investment Accounts

As mentioned, these types of accounts were designed to encourage and incentivize saving. They do this by saving you tax payments; either you will pay less taxes in the present, or you will pay less taxes in the future!

Individual Retirement Account (IRA)

The IRA is the simplest investment account of them all.

A Traditional IRA is a retirement account that lets you make tax deductions on the amount you contribute. Effectively, you don’t pay taxes on this money today, you are deferring the tax to the future when you are retired and are (hopefully) paying less in taxes. The money you invest comes from “pre-tax” dollars.

You can choose stocks, bonds, ETFs, index funds, or other assets, in an IRA. The main restriction is that penalties may apply if you withdraw this money before age 59 ½. The one exception is when buying your first home (hopefully by house hacking), where you can withdraw up to $10000 penalty free.

The annual contribution limit as of 2019 is $6000.

Roth IRA

A Roth IRA is nearly the same as a traditional IRA with one notable difference. You pay tax now on income that is contributed to a Roth IRA, but you don’t have to pay tax when you withdraw funds! We call this investing with “post-tax” dollars.

The other main difference is that you can withdraw funds at any time, for any reason. This means you may consider a Roth IRA if you are saving for a long-term goal besides retirement.

The annual contribution limit as of 2019 is $6000. Note this is the same $6000 as the traditional IRA; you cannot contribute more than that amount between these two account types in a given year.


A 401(k) is offered through your employer. Your employer is part of a plan that you can contribute your “pre-tax” dollars into. Typically there are limited investment options to choose from in a 401k, most often mutual funds.

Like a Traditional IRA, a 401(k) has penalties if you withdraw from it before age 59 ½, however there is a long list of exceptions to that rule.

Now, why would you want this heavily regulated retirement account over a traditional IRA?

The answer is simple: contribution matching.

Contribution matching is a unique perk for a 401(k). This is when a company matches your 401(k) contributions up until a certain percentage or dollar value.

For example, if your employer offers $0.50 per dollar contributed up to $2000, then a $2000 annual contribution will actually add $3000 to your account. That is an instant 50% return on investment.

This is free money, no exaggeration here! All you need to do is contribute at least enough to get the maximum contribution match possible.

Other employer-sponsored accounts

There are other types of employer-sponsored accounts that are far less common than a 401(k). However, you should still become familiar with them in case they apply to you.

A 403(b) plan is something your employer may offer in lieu of a 401(k), although they are very similar. This plan is common for nonprofit organizations, some public-sector organizations, and religious organizations.

These plans have commonly been associated with expensive annuities, which you should avoid. However, this restriction is long gone and you should have different mutual funds available to you in your 403(b).

The other notable plan, the 457(b) plan is a variation of a 401(k) available to public servants. You contribute pre-tax dollars like you do in a 401(k) and 403(b), and your employer may offer contribution matching. The main advantage is that there is no withdrawal penalty for those under age 59 ½ !

Other Tax-Advantaged Accounts

The above mentioned accounts are the likely investment accounts for beginners. However there are a handful of other tax-advantaged accounts that will be briefly mentioned below:

  • Self-Directed IRA – Not recommended for beginners. It is an IRA with virtually no restrictions; you can own real estate, private equity, and more!
  • Health Savings Account (HSA) – Contributions to this account are tax deductible; meant for those with high-deductible health insurance.
  • 529 College Savings Plan – Used to save for, you guessed it, college! Most typically has a beneficiary (ie. your children). Tax free investment earnings IF the money is being used for college and/or related expenses.

investing for beginnersTaxable Investment Accounts

Taxable accounts (sometimes known as brokerage accounts) are the simpler of the bunch. They carry way less restrictions than tax-advantaged accounts, however, sadly you must pay tax on all net investment income.

Cash Account

This is the most simple investment account you can have. No tax advantages, no restrictions!

It is called a cash account because you actually need the cash on hand to purchase a security. Virtually all tax-advantaged accounts are forms of cash accounts.

Borrowing to invest is not allowed inside these types of accounts. However, you can borrow money externally to contribute to these accounts, such as a 401(k) loan.

Opening a cash account may make financial sense once your tax-advantaged account contributions are all maxed out.

Margin Account

Finally, there are margin accounts. Let me start off by saying margin trading is risky and NOT for beginner investors!

Margin accounts allow you to borrow money from the broker to make trades. This allows you to put leverage into play, similar to real estate. However, given the high cost of borrowing (compared to a mortgage) you have to earn a significant amount of money for this to be worth it.

Which Investment Accounts Should I Use?

There is no one-size-fits-all answer here. After all, personal finance is personal! Also, there is no one “best” account, but there is an ideal combination of accounts out there for you.

There are some rules of thumb that can help you figure out which investments and investment accounts to focus on first.

Max out your employer’s 401(k) contribution matching

As I mentioned earlier, this is literally free money! You should at least contribute enough of your pre-tax dollars to get the maximum contribution match that your employer will give you.

Remember, even if you don’t like what your employer’s 401(k) plan offers in terms of investments, it is still worth it to contribute and earn that employer match. You can always roll over your account to a more flexible IRA at one point in the future!

Build up your IRA and/or Roth IRA

The one you choose to prioritize depends on your preferences and goals. Here is some food for thought:

  • The tax deferral of a Traditional IRA is ideal if you anticipate you’ll have lower taxable income in retirement than you currently do today.
  • Investing your after-tax dollars in a Roth IRA is ideal if you anticipate you’ll have higher taxable income in retirement.
  • A Roth IRA allows you to withdraw up to the total amount you’ve contributed at any time.
  • A Roth IRA doesn’t force you to make withdrawals at age 70 ½ like the other accounts do (if you’re even thinking that far ahead!)

I really like this calculator from that allows you to compare which type of IRA may be better for your situation.

saving moneyMaxed Out? Make use of brokerage accounts

Investing doesn’t need to stop once you max out your 401(k) and/or IRA contributions. A brokerage account allows you to contribute an unlimited amount of money!

One downside of brokerage accounts is taxes, but thankfully both capital gains and dividend income are taxed lower than regular income if you do it right.

Here are a couple common strategies to minimize your taxes owed:

  • Try to hold stocks for a minimum of 1 year to avoid paying higher capital gains tax.
  • Try to keep interest income (ie. bonds) in your tax-advantaged accounts, since they are taxed at the normal rate for income. **
  • Consider selling losing investments to offset your capital gains for that calendar year

** Note: Corporate bonds are typically fully taxable. Government bonds may be different; for example, interest from municipal bonds is often non-taxable. This is why you should consider consulting a financial professional to help lower your tax bill.

Start Investing Today and Build Wealth for the Future

Having an optimal strategy for your investment accounts can be a game changer, especially if you start young.

While everyone’s situation is unique, one likely common aspect is an employer’s 401(k) contribution matching. You need to take full advantage of 401(k) contribution matching. I cannot stress this enough!

From there, you need to create your own answer to the Roth IRA vs. Traditional IRA dilemma, based on what works for you. Personal finance is personal!

The fun doesn’t stop once you have all your tax-advantaged accounts maxed out; you can continue to invest through plain old brokerage accounts. Keep in mind some of the basic strategies mentioned above to reduce your tax bill.

Finally, you should consider hiring a financial professional down the road! The wealthier you become, the more complex your tax situation may get. A good accountant or CFP (Certified Financial Planner) will save you more money over the years than what it cost you to hire them.

Investing tips for beginners
benefits of index funds

When starting to invest, there is so much to learn and know about investing, finance, and money. In this post, you can learn about what beginners should know about investing and how you can start investing for your financial future.

investing for beginners

When you’re new to the world of investing, it is easy to get overwhelmed.

There are so many things to consider: what to invest in, how much you should invest, whether you should do it monthly or a few times a year, and more.

Sometimes, when you’re just starting to learn about a new subject, you can get so overwhelmed that it keeps us from doing anything at all.

However, learning how to invest and grow wealth over time is achievable.

In this post, you’ll learn about what investing is, learn about the concept of compounding, and understand why the financial markets make sense for many investors.

If you’re a first time investor, this post will be a great resource for introducing you to what you need to know about investing!

Disclaimer: I’m not a financial adviser or financial professional. Please do your due diligence and research before buying or selling financial securities and assets.

investingWhat Is Investing?

Investing is the act of “expending money with the expectation of achieving a profit or material result by putting it into financial schemes, shares, or property, or by using it to develop a commercial venture.”

Essentially, investing is the purchase of something of value with the intention and expectation of the value of this something bringing increased value in the future.

By investing, you are looking to put your money to work for you.

Investing is one of the key steps to becoming the master of your money.

There are a number of different products and assets you can invest in:

  • Stocks
  • Bonds
  • Mutual Funds
  • ETFs
  • Index Funds
  • Real Estate
  • Businesses
  • Cryptocurrencies
  • Precious Metals

This post is will be mostly concerned with investing in the equity and fixed income markets, I won’t be talking about investing in real estate, businesses or alternative assets.

Let’s go into more details about these different investments.

What are Stocks?

Stocks, also called equities, are one of the most well-known investing options out there.

Stocks are securities, typically issued in quantities known as shares, that give shareholders part ownership in the company.

There are two main ways investing in stocks pay us:

  • capital gains (you make money when you sell an asset which has gone up in value)
  • dividends (a cash payment given to investors by the company)

Throughout history, stocks have been great for growth over the long term. This is why they’re typically the largest part of the average investor’s portfolio.

For people far from retirement, their portfolio may be anywhere from 80 to 100 percent stocks.  For people at retirement, this number is usually below 50 percent.

A general rule of thumb when projecting stock returns is to use a conservative estimate of 6% a year.

investWhat are Bonds?

Bonds are another common investment found in people’s portfolios.

Also known as fixed income products, bonds are debt securities, issued by borrowers to raise money from investors.  Bonds are like an IOU issued to investors that pay interest for the life of the loan as payment for lending your money for a certain period of time.

While bonds can increase in value over time, the main benefit of buying bonds is the fixed income.

Investors typically buy bonds to use as a hedge against the more volatile nature of stocks, and for the additional income from the interest payments.

A general rule of thumb when projecting bond returns is to use a conservative estimate of 3% a year.

With stocks and bonds, these can be packaged up into single securities (you buy 1 share of a stock for example), or into funds (where you can buy many different stocks at once).

Let’s talk about these different financial products a little more in detail.

Mutual Funds

Mutual funds are portfolios that are professionally managed by financial companies and portfolio managers.

Typically these funds can be specific to a certain sector or asset class.

Mutual funds pool investors’ money together and invest in products such as stocks, bonds, and other short-term debts in various allocations.

Similar to stocks and bonds, mutual funds pay us in three ways:

  • dividends
  • capital gains 

Investors typically buy mutual funds because they are actively managed, can be very specific, are relatively low cost and are generally liquid.

Mutual funds are known for their growth and income potential, depending on the particular fund.


ETF stands for Exchange Traded Fund.  ETFs are similar to mutual funds in that they are a collection of stocks, bonds, or other securities pooled together.  One major way they are different from mutual funds, however, is that they are traded on the stock market, and thus, their price changes throughout the day.

Similar to stocks, bonds and mutual funds, ETFs can pay us in two ways:

  • capital gains
  • dividends

Investors typically buy ETFs because of their low cost, high diversification and liquidity.

ETFs can be used as growth or income investments.

learn to investIndex Funds

An index fund is a mutual fund or ETF that seeks to track the return of a market index.  For example, there is a mutual fund that tracks the S&P 500 Index, which seeks to mimic the performance of the S&P 500.

Similar to an mutual fund or ETF, an index fund is a security that can be bought and sold on the stock market.

Similar to stocks, bonds and mutual funds, ETFs can pay us in two ways:

  • capital gains
  • dividends

Investors typically buy index funds because they are highly diversified, have very low fees, are fairly liquid and offer different investment options.

Index funds are typically used for both growth and income investments.

Now that you’ve learned about the different market products, let’s dive deeper and talk more specifically about the stock market.

Why Should You Invest with the Financial Markets?

There are a number of reasons why we invest in the financial markets:

  •  Make income through dividends
  •  Make income when we sell through capital gains

The main reason we do so, however, is because of compounding.

What is compounding?

The best way to think about compounding is to talk about compound interest.

According to Investopedia, “compound interest is the financial principal that dictates that interest is calculated not just on the initial principal amount of the deposit, but also all of the accumulated interest of previous periods of a deposit or loan.

Compound interest is commonly known as the eighth-wonder of the world, and it’s no question why – it’s an amazing thing.

In order to best look at how compound interest works, let’s look at a real life example.

How Compound Interest Affects Your Investments

Let’s say that you’ve invested in an asset which returns, on average, 7% each year, and let’s say you invest $10,000 the first year.

After one year, you have $10,000 of your original investment, and $700 of growth.

While yes, $700 would be great to take out and spend, you decide to leave it in because now, that $700 is going to grow at 7% interest in addition to the rest of your $10,000 original investment.

After the second year, you now have $11,449 ($10,000 + $700 + $700 * 7%)

Again, you decide to leave it in, since now, both $700s are going to grow in addition to your original investment.

Over 30 years, the growth is quite large: your original $10,000 investment is worth $76,123!

After 1 year, you barely had anything more than your original investment. But after 30 years, you had over 7 times your initial investment!

That’s the power of compounding!

Compound interest graph


Starting amount: $10,000 | Additional yearly: $0 | Growth Rate: 7.0%

Value after 30 years: $76,122.6

Now that we know why we should invest, the next question is what should you invest in and what are the next steps to start growing you money?

How Should You Invest Your Money?

At this point, investing probably sounds like a good idea. Over time, you can increase your wealth and money through investing.

Now, you may ask, “how should I invest my money?”

How to invest and what to invest in are two of the most important, yet complicated questions, to answer.

Every person has a unique financial situation, and have many different variables affecting their lives.

These different variables make it difficult to say one particular way of investing is best for everyone.

It depends entirely on what your goals are, and the amount of time (and income) with which you have to do it.

However, there are some different things to consider when looking to answer what you should invest in and how to invest.

investing for beginnersActive Investing

If you prefer to be a more active investor, you can invest directly in a new product, real estate, a business, or a start-up.

Active investing is more hands-on and will typically require a bigger time and capital commitment. With active investing, the potential returns can possibly outweigh risks, and this is what many finance professionals try their hand at.

You could also invest in single stocks and buy and sell to your liking, though this active form of investing in the financial market can carry additional transaction fees and risk.

If you want to spend more time researching and learning about investing and different products, active investing may be for you.

However, if you want a more passive approach to building wealth, there is passive investing.

Passive Investing

If you don’t have a lot of money or time to invest, and you want a pretty hands-off approach, then it’s likely you’ll want to weigh heavily in more passive forms of investing, like index funds.

Index funds are like a bundle of stocks or bonds that give you exposure to a wide variety of companies, all in different sectors and market-caps.

Index funds look to track a certain index, such as the S&P 500 or Dow Jones Industrial Index.

By investing in these index funds, you can capture the general trend of these indices and own a number of different companies.

setting goals and dreamsHow Often Should You Invest?

The next question when thinking about how you should invest is to talk about the frequency of your investing.

Before you decide how often to invest your money, you need to know the various ways of doing it. You can either do it in a lump sum, or over time in irregular amounts, or over time in predetermined amounts.

Dollar-cost-averaging is the idea of investing specific amounts of money, at specific periods of time, in order to offset any volatility.

For example, if you have $1,000.00 to invest over a one-year period, then you would buy approximately $83.33 worth of your investment every month.

What is Dollar Cost Averaging?

Dollar cost averaging is a powerful concept and something many people do to avoid timing the market.

By dollar cost averaging, you avoid guessing and trying to time the market. Trying to out beat the market by investing only when you get a gut feeling may not be optimal for your investing returns.

Here’s an example of the benefits of dollar cost averaging (DCA) from an article on Investopedia:

“Let’s assume an investor invests $1,000 on the first of each month into Mutual Fund XYZ. Assume that over a period of five months, the share price of Mutual Fund XYZ at the beginning of each month was as follows:

Month 1: $20, Month 2: $16, Month 3: $12, Month 4: $17, Month 5: $23

On the first of each month, by investing $1,000, the investor can buy a number of shares equal to $1,000 divided by the share price. In this example, the number of shares purchased each month is equal to:

Month 1 shares = $1,000 / $20 = 50, Month 2 shares = $1,000 / $16 = 62.5, Month 3 shares = $1,000 / $12 = 83.33, Month 4 shares = $1,000 / $17 = 58.82, Month 5 shares = $1,000 / $23 = 43.48

Regardless of how many shares the $1,000 monthly investment purchased, the total number of shares the investor owns is 298.14, and the average price paid for each of those shares is $16.77. Considering the current price of the shares is $23, this means an original investment of $5,000 has turned into $6,857.11.

If the investor had spent the entire $5,000 on one of these days instead of spreading the investment across five months, the total profitability of the position would be higher or lower than $6,857.11 depending on the month chosen for the investment. However, no one can time the market. DCA is a safe strategy to ensure an average price per share that is favorable overall.”

By dollar cost averaging, you help offset volatility by spreading out your purchases, while also maximizing profitability.

In the example above, it’s possible to have made money by just putting in a lump sum. However, the chances of you picking the “right” month is low. It makes much more sense to use DCA. If you are a first-time investor, investing a lump sum right before a market crash can be demoralizing. DCA helps to ensure that this doesn’t happen.

Acting based on emotion, or how we think the market may or may not react can lead us to buying or selling stocks just because.  Acting with emotion can cause you to make some bad decisions.

How Long Should You Keep Your Investment?

Another question to consider is how long should you keep your investments.

This question is pretty simple.  Are you investing for now, or for your future?

the guide to banking for non-bankers

If you’re investing for retirement, then it’s likely you’ll keep your investments going for the rest of your life!

If you’re investing as a way to bring in extra income, and not necessarily fund your financial freedom, then a good rule of thumb is to keep your investment for about five years.

The main reason for this is because five years is a fairly lengthy period of time when it comes to investing.

It’s short enough that it’ll hopefully allow you to recover from a loss, but long enough for you to potentially get some good profits.

If you’re trying to reach financial independence, you should be prepared to leave your money in for much longer. Some investors literally leave their money in an investment account for decades, as this is a way to maximize profits while reducing volatility and loss.

Should I Invest or Pay Off Debt?

Another question to consider when thinking about investing is should you invest or pay off debt?

Many financial advisers suggest paying off debt before investing any money into the stock market.

This is because the interest that accrues from high-interest debt like payday loans, credit cards, etc., cost you much more than what you will earn from your investments.

For example, if you have $1,000 earning 7% interest a year in a brokerage account, you’re earning $70 a year.  On the contrary, if you have a $1,000 balance on a credit card with an interest rate of 18%, your debt is costing you over $180 a year.

Keeping your money locked into an investment instead of using it to help pay off your debt is actually costing you over $100 a year!

On the other hand, if the interest rate on your debt is super low, it may make more sense to invest your free cash, rather than paying off the debt.

For example, if you have an auto loan at 4%, it might be better to invest your cash in the stock market because you can earn higher returns than 4%. The stock market has historically returned 7-8% on average over the last century.

By investing in the stock market, you can theoretically grow your wealth 3-4% more than by paying off debt.

Questions to Ask Yourself about Debt or Investing

Before deciding to invest or pay off debt, you should ask yourself the following questions:

  • Do you have enough money each month to cover your debt payments? Do you have additional money at the end of each month to invest?
  • How much debt do you have? What are the interest rates? Do you feel debt has a grip on your life or finances?
  • If you have extra money available to you, will you actually invest it? Or will you spend it?
  • Do you have an emergency fund?
  • What are the terms of your debt? Are there any penalties for prepayment? Is your interest rate adjustable?

By considering the questions above, it will be easier to decide whether to pay off debt first or to invest.

Start Investing Today and Build Wealth for the Future

Investing in the financial markets is commonly thought of as hard or confusing. While investing has some confusing jargon, the basics of investing aren’t too complicated.

Now, with this article, you have the basics for investing.

Investing can be as simple or as complicated as you want it to be.

The main takeaway is investing, whether it’s in stocks, bonds, or a different investment, is critical to building wealth.

By investing, you can grow your wealth over time and reach your financial goals.

Investing is the greatest wealth builder of all time – you can’t afford to miss out on it!

Beginner Investing Tips

digital real estate creation

I’m incredibly bullish when it comes to digital real estate.

While I love physical real estate, I ended up being very successful the last 3 years house hacking, and I fantasize about the idea of someday owning a commercial building, there is something about creating and owning online assets which makes me super excited.

It’s never been easier to learn new technologies, create content, and publish your ideas and build a brand.

In this post, I will be sharing with you why I believe digital real estate is an asset class worth looking at for investment purposes, examples of how people are making money online, and what my digital real estate plans are as a part of my plan to build wealth.

What is Digital Real Estate?

real estate First, what is digital real estate?

Digital real estate is digital property – a domain and anything built on that domain. It is similar to real estate, where real estate is land and anything built on top of that land.

I love real estate for a number of reasons. Real estate is:

  • Accessible – Anyone can buy it
  • Appreciable – Can increase in value over time
  • Leverageable – You can buy on margin and borrow against equity
  • Rentable – Cash flow baby!
  • Improvable – Through sweat equity or contracting out
  • Deductible/Depreciable/Deferrable – Amazing tax benefits

Digital real estate and online assets share many of these same great properties as physical real estate.

What bothers me about traditional real estate though is the cost of entry. While there are many ways to get into real estate with little to no cash (I bought my house for only about $5,000 down), right now, the competition is fierce and the price of real estate continues to rise. For a beginner looking to invest in real estate today, the cost of entry is in the tens of thousands of dollars.

This is where digital real estate shines: I can buy a domain for $12 and host it for less than $5 a month!

4 Reasons to Pursue the Creation of Income Streams Online

There are a number of reasons to be bullish on digital real estate. Below I’ve listed 4 reasons why I believe you should consider getting online and creating, instead of consuming:

  1. You build a brand for yourself, on your terms
  2. You own an appreciating asset
    • Over time, when you add content to your site or web application, value is created.
    • Many websites and applications have 5 and 6-figure valuations. Even something as simple as a picture and video messaging application can be worth billions (I’m talking about Snapchat.)
  3. Low Overhead and Start-up Costs
    • Many people don’t have thousands of dollars to put into a business or education. Wouldn’t it be great to get started in business for a few hundred bucks?
    • As I mentioned earlier, I can buy a domain for $12 and get server space for less than $5 a month. For a whole year, you could theoretically spend less than $100 and build a brand.
  4. Access to Millions of Users
    • With traditional real estate, or even a traditional day job, you restrict your reach to those only in your city or county.
    • With digital real estate, you have the opportunity to interact with people all over the world. Thousands of people are coming online each and every day. There are still 3 billion people who aren’t on the internet, and this number isn’t getting any bigger with constant advances in technology.

The reasons listed above are just the tip of the iceberg.

What are some ways of making this whole online cash flow thing work? How are people actually making money online?

Examples of How to Make Money Online

Personally, I’m still trying to figure this out, but generally speaking there are 4 ways people have generated income online. This list is certainly not comprehensive, but gives you a decent idea of what’s possible out there:

  • Ads
    • Ads are straightforward: you display ads on your website and earn money through impressions (how many times the ad loads) or on clicks (whenever a viewer clicks on the ad).
    • For my website, I use Google AdSense for ads. One downside to using Google AdSense is Google determines which ads it will display for you.
    • Luckily, there are other ad networks you can apply to, and if your site becomes big enough, you will have the opportunity for direct ads (where you work with specific companies to serve targeted ads).
  • Affiliate Marketing
    • Affiliate marketing is a way many bloggers are making money. There are numerous affiliate sites (Flex OffersAffiliate Programs for example) which have partnered with many companies. Also, there are programs, such as Amazon Affiliates and ShareASale, which allow you to be more specific in the product you are linking to.
    • With affiliate marketing, you are looking to have your viewers and users purchase through your links and recommendations. After your users purchase, you get a kickback of a certain fixed fee or percentage of the sale.
  • Your own product (eBook, Merchandise, Course, etc) or service (Consulting, Coaching, etc)
    • Do you have any interest in writing an eBook, selling merchandise, or creating an e-course for your viewers? What about providing a service and charging for your time? These are all great ways to make money online.
  • A pay wall or subscription service
    • The concept of “If you pay me $20 a month, I will give you exclusive content!”
    • To successfully do this, you need to have great free content and great premium content to justify the subscription fee.

At this point, I’m sure you are wondering, all of this theory is great, but can you provide me some examples?

Who are Some Examples of Successful Bloggers and Digital Marketers in 2018?

There are a number of bloggers who come to mind who are successfully making money online in the personal finance niche, I’ll feature 4 and you can check them out for yourself.

There are so many amazing bloggers, entrepreneurs, and marketers who I could list here… I’m lucky to have met a number of these people, and am inspired each and every month reading their content.

Why I Believe Digital Real Estate is Worth Owning

digital real estate creationLet’s rewind a few years.

I’m not naturally a good writer or artist. Growing up, English and Language Arts were two subjects I didn’t really like and it showed in my grades. I don’t have a big vocabulary, and still don’t really understand or care about how to properly structure a sentence. In addition, as a natural introvert, I had to focus on becoming an effective communicator.

Coming out of college, I was okay in terms of technology. With 2 math degrees, no formal education with computers and how the internet works, and no experience with marketing, there weren’t too many reasons why I should have been interested in starting a blog or online business.

I didn’t care – you could say that these were all reasons I needed to get online and work on these skills.

At the end of 2016, I started The Mastermind Within, and 14 months later, there are 200 people coming to this site daily. By January 2018, I made $86 through this site – $86 where there was nothing before.

In the course of this website’s life, I’ve learned and improved upon a number of the following skills:

  • Marketing Skills
    • Email, Paid Ads, Social Media
  • Front-end web development skills
    • HTML, CSS, Javascript
  • Management and business skills
    • Negotiation, time management, prioritization of tasks, networking
  • Writing
    • Go read some of my early posts and some of my more recent posts to see how much writing can be improved upon over time 😉

Humans naturally overestimate what they can do in a day, but underestimate what they can do in a year.

This foray into digital real estate with The Mastermind Within has me incredibly excited for the next few years.

My Plans in the Digital Real Estate Space

I have a ton of ideas for which I want to try and implement to create cash flow online through digital real estate.

For one, I will be continuing to post regularly on The Mastermind Within, with a podcast posted on Tuesdays.

A number of other ideas involve full stack development and the creation of web applications.

I’ve been working through 2 Javascript books in preparation for this venture:

node express web development book react js web development book

I’m looking to learn everything from the creation of an HTTP server, how to serve static and dynamic content, manipulate and save data from forms online, build sites from scratch, and everything in between.

With this knowledge, I want to build many different applications. A few off the top of my head right now are:

  • A newspaper-like site which dynamically serves today’s best content in a given niche
  • A lightweight bookkeeping application
  • Social media analyzers and bots

As I learn more and more, the possibilities are endless. I wish I had discovered this 5-10 years ago – web development is what I now believe is my true calling.

The Ultimate Goal for My Digital Real Estate Endeavors

My ultimate goal would be to create a number of applications, communities, and websites where I could be cash flowing a few thousand dollars a month across my portfolio.

Getting 10 applications to each spit out at least $100 a month? Is this doable? I don’t see why not!

Interested in starting a blog or website? Check out this guide on how to get started online.


With housing prices skyrocketing all around the United States and Canada, traditional real estate investing is becoming harder and harder.

Starting a business online, building a digital brand and product, or creating content has never been easier. For the most part, all it takes is a computer, an internet connection, determination, and a few hundred dollars to get started.

There are so many ways to make money online and build wealth with digital real estate.

I’m bullish on digital real estate – and as more people come online in the world, what we create now in 2018 will only be more valuable over time.

2018 is a year for building, growth, and creation. Will you be getting online and creating?

Readers: do you invest in traditional real estate? What do you think about investing in digital real estate? Are you a creator or a consumer?


benefits of index funds

Index funds are a great investment vehicle to invest in a low cost and diversified way. However, there are some downsides as well to investing in index funds.

Investing in Index Funds

Disclaimer: I’m not a licensed investment professional. All investments come with risk. Please do your own due diligence before investing in any product and investing in index funds.

“V-T-S-A-X, V-T-S-A-X, V-T-S-A-X!”

If investing had rallies, I’d imagine Vanguard nation members would have be chanting about VTSAX, an extremely low fee index fund.

What is index fund investing, and why is it so great? Simply put, index funds allow you to own thousands of positions and capture the general stock market trends at an extremely low cost. I like index funds for these reasons: they are supposedly lower risk because they are highly diversified, and the fees are nearly 0. Comparing this to actively managed funds with fees of 1-2% or more, you get much more bang for your buck!

Investors and traders ask many of the following questions each year: what stock do you think will perform best this year? Is there a sector that will see success in the next 2-3 years? What companies’ have the best outlook?

For the everyday person, many of these questions are not worth asking, or answering. I personally own thousands of companies, and I never think about those questions. With so little time to devote to financial statements and investment research, it’s just not worth looking for the next Amazon or Apple.

How do I own thousands of companies? It’s quite simple! Index funds!

In this post, I will be sharing with you the benefits and risks of index fund investing, why I own thousands of companies through index fund investing, and how you can own thousands of companies too. I’m also going to touch on why index fund investing works, and the problem with passive index fund investing.

What are Index Funds and the Benefits of Index Fund Investing?

What are index funds?

Index funds are essentially a collection of assets which, as a whole, look to replicate the performance of some market or sector.

For example, a stock market index fund would be a collection of many stocks, such that the performance of the index fund would mirror the performance of the general market.

There are many index funds you can buy through different brokerage accounts. To give you a better idea of some examples of index funds, looking at my 401(k) account, I have access to the following index funds:

  • General Equity Market Index Fund
  • Large Cap Index Fund
  • Small Cap Index Fund
  • Dividend Index Fund
  • Bond Index Fund
  • International Equity Index Fund
  • And the list goes on and on

There are hundreds of funds out there for many different sectors, asset classes, and industries.

What are the Benefits of Index Fund Investing?

“A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money.” – Warren Buffet

Warren Buffett, John Bogle and many of the other great investors believe investors like us should invest in index funds. There are a few benefits to index fund investing vs. investing in individual securities.

One such benefit of index funds is diversification. It’s unfortunate, but it’s a fact that some companies will fail. It’s also a fact that some companies will outperform others. Humans don’t have crystal balls, and to be able to select which ones will fail and which ones will perform well is nearly impossible.

Instead, with index funds, we can own a piece of many companies, and if some fail, it is fine because others are likely doing well and can help make up for that difference – meaning we will also own the winners! On average, we will be able to replicate the general market.

Over time, the stock market typically has trended up, and as a result, index funds allow us to able to capture a piece of this trend.

Another benefit of index fund investing is a combination of lower fees and out-performance when compared to actively managed funds. Vanguard’s equity index funds average a 0.12% expense ratio vs. 0.62% for actively managed funds. In addition, these index funds have outperformed actively managed funds for many years!

Why pay more for less? Index funds are superior when considering fees and performance over time. In addition, if done passively (i.e. set and forget), your taxes and transaction fees are greatly reduced.

Why does Index Fund Investing work?

In the previous section, we talked about the benefits of index fund investing. Those reasons are contributing, but not exactly why index fund investing works.

Index fund investing works because the market is supposedly “efficient”.

The Efficient Market Hypothesis is a fundamental concept in portfolio management theory, and simply states the prices in the market reflect all information out there on a company. It’s a hypothesis, though it makes sense. (I don’t know if I’m completely on board with it, but that’s a discussion for another day.)

Under this theory, how does the market stay efficient?

Theoretically, active investors are constantly looking to determine if the price of assets is in line with expectations or not, and should be buying or selling to “close the gap” between the price and supposed expectation.

Index fund investing works because it follows the stock market trends, and also takes advantage of these active investors who are doing the heavy lifting of price discovery.

How You Can Own Thousands of Companies

I don’t have time to research the entire market for the best companies and stocks, and even if I did, my predictions would most likely be wrong.

I’m guessing you don’t have time to research and look over financial statements. If you are looking to invest passively, take a look at index funds.

With minimal fees, and the ability to own thousands of companies, properties, and bonds, you can capture the general trend of the market and reduce risk through diversification.

This may sound like a boring strategy to wealth, but it’s a time tested winning strategy for financial success.

Index funds are not exclusive to only high net worth individuals. Beginners and experienced investors alike can invest in index funds with little involvement and effort up front.

To own thousands of companies and get invested in the general market all that is required is to open up a brokerage account, do your due diligence and figure out which index fund is appropriate for your risk tolerance and financial situation, and boom! You’re invested!

Many people like Vanguard index funds. I know many personal finance bloggers who swear by these funds and will always invest in them!

Set and forget! Stay consistent with your investing, continue to learn more about finance and saving, and you will be on your way to financial success. Over time, you might be able to become a stock market millionaire!

However, with all investing, there is risk. For index funds, there are a few risks you need to consider.

What if Everyone Decided to Invest in Index Funds?

Something I like to do is think about different scenarios, take things to the extreme (if necessary), and think about the outcomes (otherwise known as a thought experiment).

Here’s something to ponder: what if everyone decided to invest passively in index funds – what would the outcome look like?

One of the common recommendations for investing in index funds is to dollar cost average (aka buy a little each month), and not touch the nest egg for 20-30 years.

At some point though, if everyone decided to invest in index funds, dollar cost average, and never touch their nest egg, wouldn’t the price of assets just keep rising (without care for the underlying fundamentals?)?

Would this be (dare I say) the beginnings of a Ponzi-like scenario and scheme?

While yes, at some point, people probably will start selling down their assets, the market can’t always go up. Otherwise, it’s not a market.

Index fund investing works because you have active money managers who supposedly “keep the market efficient”, but if those players went away, the market would certainly not be efficient.

The Problem and Risks of Index Fund Investing

Here’s the problem with passive index fund investing: with more people doing it, the less “efficient” the market will be, and this exposes you to a concept known as “the herd mentality”.

What do I mean? If everyone is always buying, regardless of price or the underlying value, then your expected returns will be less than prescribed. In addition, The Earth and economy is closed and there is a ceiling to everything.

Buying and buying and buying will just lead to boom, bust, and ruin at some point. It’s basic physics.

Don’t Be a Turkey when Investing

One of my favorite authors is Nassim Taleb. He is an author, philosopher, mathematician, former trader, and all around thought provoking individual. In one of his books, The Black Swan, he talks about the turkey problem:

“Consider a turkey that is fed every day,” Taleb writes. “Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race ‘looking out for its best interests,’ as a politician would say.

“On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.”

thanksgiving turkey


While I don’t necessarily see this drastic of a possibility to occur in the market, to say that the probability is 0 is to also make a mistake.

Considering all assets, having a safety net, and allowing for the possibility of failure of one asset will allow real financial independence and resilience.

Thinking Critically when Investing is Very important

There’s a few things here I want to touch on before concluding.

First, investing in stocks has been a great way to build wealth in the past, and something I do in my investment portfolio.

With this section of the post, I’m not saying investing in stocks is a bad thing. Rather, I’m trying to inspire unique and original thoughts for you to think about in personal finance life.

There are benefits and risks to everything in life, and it’s important to weigh them before making a decision.

Second, investing passively in low cost index funds has been, and probably will be, a solid investment going forward. With that said, if it becomes too prevalent in the future, there could be very wild swings in the market (and also the possibility for manipulation and a lack of liquidity overall).

There’s no such thing as a free lunch (even though many people hype index fund investing like it’s a gift from a higher power).

Third, speaking a little more in general, it is imperative to think critically about your situation. Everyone is different – everyone has different life experiences, perspectives, upbringings, and goals. Sadly, following the herd blindly will not result in success.

Instead, following what you believe, and have researched, works (and maybe that is following the herd) will lead to success.

Is Index Fund Investing the Best Way to Invest?

Index fund investing isn’t going away, and it’s a great way to invest and diversify your investments.

By investing in index funds, you can own thousands of companies, and get exposed to the broader market. There are many benefits for investing in index funds, as well as risks.

With the risks of index funds described above, am I going to stop using index funds in my investment portfolio? No.

Am I considering other assets and thinking more about my asset allocation, strategy, and the market going forward? Yes.

Am I trying to think critically in everything I do? Yes.

At the end of the day though, thinking critically is important in everything you do.

The markets don’t care if you succeed or not. It’s okay to re-balance your portfolio, it’s okay to assess the risk of your portfolio and see if there is anything you can do to navigate potential storms, and it’s okay to challenge yourself and your thoughts.

Index fund investing could be a great choice for your portfolio – you have to do you own research and decide what is best for you.

Readers: do you own a piece of thousands of companies? Do you enjoy researching individual assets? What are your thoughts on index funds?

The Benefits and Risks of Investing in Index Funds
The Benefits and Risks of Investing in Index FundsThe Benefits and Risks of Investing in Index Funds


Investing in Index Funds
Investing in Index Funds
Investing in Index Funds
Investing in Index Funds
stock market cannot always go up

“The stock market always goes up! It’s a sure thing! There’s 90 years of data backing me up, and look, just in 2008 when it seemed all was lost, the stock market came roaring back! The stock market is always up and to the right!”

I want to throw up.

Here’s the only issue with saying the stock market will always trend up: the earth is a closed system. 

I could end the post there, but that’s not interesting, productive, or informative for you to understand the underlying and fundamental reasons of how my statement proves why the stock market cannot always go up.

Saying the stock market will always go up ignores physics and biology. It’s not too difficult to reason the conclusion when presented with the following case, but I’m sure there will be push back 🙂

In this post, I’m going to be sharing with you why the stock market cannot always go up.

What My Argument is Not About

First, I need to clarify what I’m talking about when I say “the stock market cannot always go up.”

Here’s a simple picture to visually explain what I have an issue with: (picture of the stock market always going up)

stock market goes up over time

My problem is the comment that it assumes infinite growth in a finite system.

I have no problem with the argument, “the stock market will always come back to its previous high, and possibly go above that previous high, because humans are resilient and will come up with better technology” because this is true. Over time, technology does improve, processes become more efficient, and businesses become more profitable (in a capitalist society).

However, this statement is a completely different picture:stock market doesn't go up over time

I have no problem with this picture and the statement behind this picture. A boom followed by a bust, followed by a boom, is nature.

I have no problem with investing in the stock market, and have a fair amount of my net worth in equities and index funds.

It’s the first picture here, which has infinite growth baked into it that gets my blood boiling.

The Problem with Infinite Growth

stock market cannot always go upThe statement, “The stock market always goes up” assumes infinite growth.

Saying, I’m at $200,000 in investments today, and in 30 years, I’ll have $2,000,000 assuming 10% growth is an exercise in absurdity. (While yes, it’s possible that with wonky money printing techniques we will all be millionaires and billionaires, what do you think the dollar will actually be worth?)

Here’s the thing with infinite growth of stock market trends: it assumes a number of things which are not consistent with what we experience on a day to day basis here on Earth.

What do I mean?

First, let’s remember why stocks have value. A stock has value ONLY because the underlying company is PROFITABLE and PRODUCTIVE.

To be profitable and productive, that company needs to use energy and other materials to produce value. There are a number of finite inputs to this process (seemingly ignored by economists).

First, energy is finite. Second, the materials are finite. Third, the customers are finite. To assume infinite growth is to assume one of these is infinite.

It’s that simple, but I need to say a few more things.

Your Data Driven Argument is Flawed

Again, I need to make this point: I think equities are a solid investment in most economic environments. In a growing economy, by definition, the stock market will go up.

Over the last 100 years, the United States stock market has trended upward and has stayed up:

dow jones over time

I’m going to make the joke again… is that the chart of Bitcoin?

The United States has had the world’s number one economy for the last 50 years, so yes, the economic growth of the general stock market should be up and to the right.

What’s interesting though, to say, “In the future, I’m going to project economic growth at 7-10% annually” is to mistakenly go against one of the fundamental pieces of statistics and econometrics: past performance doesn’t guarantee future results.

To say “the stock market always trends up”, is to make this mistake.

In addition, this ignores many of the limits which we talked about in the previous section, namely customer base, materials, and energy.

These cannot be ignored as money is a claim on energy, and debt is a future claim on energy.

Again, it’s a systemic issue rather than a financial issue. The economy is a subset of the environment (the Earth), not the other way around.

An Example of Growth Gone Wrong: Cancer

We all know about unrestrained and infinite growth in a finite system gone wrong – its name is cancer. Unfortunately, there are many things that cause it, and doctor’s haven’t quite found a cure for it.

Cancer happens when certain cells go rogue and stop functioning the way they are supposed to:

  • Normal cells know when to stop growing; cancer cells grow with abandon with no regard to the space around them.
  • Normal cells kill themselves when their duties are done, a process called apoptosis; cancer cells ignore signals to die and, without treatment, may divide indefinitely and become virtually immortal.
  • Normal cells communicate to help their host survive and thrive; cancer cells communicate only to deceive the body’s defenses.

If not treated (and even if it is treated), these rogue cells can overtake the human body and can lead to death.

I hate that I just had to write that sentence, and I hate that this is an example on my blog, but the point is true: infinite growth in a finite body is NOT sustainable.

A Case Study of Wall Street Analysts Not Understanding Biology and Physics from 7/25/2018: Facebook

In July 2018, the market had quite the shock. After hours, Facebook had their 2nd quarter earnings call and talked about headwinds for future financial performance.

Facebook’s stock dropped 23%. Factors leading to this were a number of things, but most prominently was a comment about how user growth had slowed.

facebooks users over timeThere are two things which are funny here:

First, 44 of 48 market analysts had Facebook rated a buy for recommendation.

Second, I don’t see how the “slowing user growth” narrative wasn’t sniffed out earlier looking at the above chart. (Oh wait, Mark Zuckerberg made that comment 3 months ago) Maybe those analysts should read my blog, because they obviously are ignoring one of the fundamental pieces to biology and population growth: carrying capacity.

There are only 7 billion people on this Earth, and about half of those people don’t have internet.

Population growth, user growth, really any growth in a finite system follows the following shape:

population growth picture

It’s not rocket science. But for whatever reason, in the name of infinite growth, it’s ignored time and time again.

How to Think About the Stock Market

At this point, maybe you agree with my argument now, and maybe you don’t.

The goal of my work here on The Mastermind Within is to inspire new thoughts and perspectives to challenge you and help you become better in your life.

If I can succeed in doing that then I’m happy.

Let’s change the perspective I’d ask you to view this post through here and shift it to one of sustainability.

Here’s what I want you to take away from this post:

  1. When using statistical arguments, look to understand the underlying assumptions and consequences of those assumptions to ensure your argument is sound
  2. Look to promote sustainability (and work to become more sustainable in your ways) where possible, and understand that there are limits to our world (there are limits we need to acknowledge unfortunately even if we live with an abundance mindset)
  3. Realize things can be different than they appear. We all come from different perspectives and experiences, and have different biases and opinions. I’m not an expert and could be completely wrong here. At the end of the day though, I’m challenging myself and hopefully challenging you.
  4. Challenge yourself on your portfolio and asset allocation. It’s okay (and probably a good thing) to own a basket of assets and become more financially resilient.

Concluding Thoughts on the Stock Market

I’m going to get some heat for this one, but I don’t really care. The conclusion is obvious when you dive in and think about it.

I’ve been searching for the truth – looking inward to who I am as a person, looking outward to examine the world around me, and drawing conclusions based on my observations.

I’m not an expert. I’m not a guru or a financial expert. The only thing I know is that I know nothing at all. Being eternally curious is how the mind grows. I’ve been all over the map and learned a ton from writing this series. I hope you have as well through reading it.

Here’s the thing: we live in a closed, finite system. The Earth has limited carrying capacity. There is no infinity here on Earth. It’s physics. It’s biology. These points can’t be ignored. The stock market cannot always go up.


overview of economic systems

What does Capitalism actually mean? What is Marxism? Where could society and the economy go after Capitalism, and what is Post-Capitalism?

When searching for the truth, there’s a lot of information to read, consider, explore, and examine. When talking about money, the environment and economy, and other big picture thoughts, a lot of diving deep is required.

During high school, we are taught very briefly about the different economic systems of Capitalism, Socialism, and Communism. However, these are big ideas which are tough to comprehend (and admittedly, probably pretty boring for the typical high school student).

Today, let’s learn about these different economic systems.

In this post, we will explore (at a high level), the economic systems and theories of capitalism and Marxism, discuss the current economic and political environment through the lens of these theories, and talk about potential solutions for a sustainable future (guided by a book I read called Post-Capitalism).

An Overview of the Modern Economic System

Before talking about the current economic environment, let’s talk about the economic system we currently live in. Let’s dive into 2 systems (of many… think feudalism, slavery, socialism, communism, etc.) and thoughts which have influenced and formed the current economic system: capitalism and Marxism.

What is Capitalism?

Capitalism is an economic system where private entities own the factors of production. There are four factors of production:

  • entrepreneurship
  • capital goods
  • natural resources
  • labor

The owners of capital goods, natural resources, and entrepreneurship exercise control through companies. An individual owns his or her labor.

The economic system employed in the United States is capitalism.

In a capitalist society, owners look to maximize their profit for their companies, and derive their income from ownership. Individuals work for the owners and are paid an hourly wage or salary.

For Capitalism to work, it requires a free market economy where goods and services are subject to the economic laws of supply and demand: as demand and price have a positively correlated relationship (demand up means prices go up), and supply and price have a negatively correlated relationship (more supply means lower prices).

Capitalism works in this environment because, in theory, multiple companies will compete for profits which will lead to increased efficiency, moderate prices, and efficient production.

In addition to a free market economy, robust capital markets should allow participants to issue, buy and sell stocks, bonds, derivatives, currencies and other commodities.

What are the Political Implications of Capitalism?

overview of economic systemsCapitalism is an economic system, but also has political and government implications.

Depending on the situation, government involvement can vary from very hands on to very hands off. There are different schools of thought here, but I’m going to focus on Laissez-faire economic theory.

The role of the government which employs Laissez-faire economics involves a government which protects a free market and the conditions necessary for capitalism.

The government only steps in to prevent monopolies or oligarchies, and also prevents manipulation of information between parties and within markets.

To keep order in the economy and environment, the government should provide a strong national defense and maintain infrastructure.

What works so well in Capitalism is there is an intrinsic reward for innovation and growth: more money and profits for the owners. While Capitalism has seemingly worked for the past 200 years, but that doesn’t mean it doesn’t have it’s flaws or disadvantages.

What is Marxism and Marxist Thought?

In the 1800s, a man by the name of Karl Marx was coming up with his own economic system and theory while studying Capitalism and the economy: Marxism.

I’d like to preface this section by saying something I didn’t realize until after my research.

Back in high school when I was learning about economics and world history, we touched on Marxism a little bit, but didn’t dive in. For my learning, it seemed the teacher and classmates had the thought that Marxism was horrible and the same thing as communism.

Since that was the case, my logic was I didn’t need to study the theory because it was horrible and therefore probably misguided or wrong.

What I learned in my research is that Marx had some very interesting thoughts and points which had an influence on my thoughts.

A lot of Marxist thought surrounds challenging where Capitalism goes wrong -how it ignores social dynamics of a class struggle between workers and owners. It was very interesting to read about Marxism, since Capitalist thought doesn’t talk about this “class struggle”.

While there are quite a few logical fallacies and pieces which turned out to false in Marx’s thoughts, Marxism is a valuable system to study and I’m going to dive in below for us here.

The Issues of Capitalism from Marxist Thought

There are a main points that Marx talked about:

  • The Theory of Alienation
  • The Labor Theory of Value
  • The Materialist Conception of History

These points came about through a few questions posed by Marx. In his eyes, it wasn’t enough just to hypothesize about the workers and owners in general, but to try to look through the eyes of those individuals and work his way up.

The questions were as follows (and with respect to the order above):

  • How do the ways in which people earn their living affect their bodies, minds and daily lives?
  • What is the effect of the worker’s alienated labor on its products, both on what they can do and what can be done with them?
  • How did capitalism originate, and where is it leading?

Let’s dive in.

Marx’s Theory of Alienation

Let’s talk about the Theory of Alienation.

From Marxist thought, alienation of the worker occurs in a Capitalist society in a few ways:

  • The worker is alienated from his or her productive activity – he or she plays no part in decided what to do or how to do it. Instead, the owner sets these conditions of work, the speed of work, and even determines when the worker can work (through hiring and firing).
  • The worker is alienated from the product they are creating: they have no control or what is made and what happens to it.
  • The worker is alienated from other human beings. Over time, the workers and owners become split as owners continue to use their control over the worker’s activity and product to further their own product.  But, even with in the working class, there’s alienation as people are trying to survive the best they can.
  • Finally, the worker is alienated from something so near and dear to human beings: creativity and community. Since labor is predetermined, creativity is taken away and humans lose out on developing this skill over time in their work.

Through Capitalism, Marx argues, that when looking at The Theory of Alienation, a worker ends up being seriously diminished who is physically weakened, confused, isolated, and virtually without power. The products they produce are outside of their control, and the distribution is largely unknown as well.

Through this, the world ends up with a weakened working class which was enabled through the workers: they needed a wage, and exchanged their time for money.

Marx’s Labor Theory of Value

Now, let’s talk about another point Marx talked about: the labor theory of value.

In particular, Marx was concerned with the value of the products produced with regards to the “class struggle” and economy. Marx agreed with traditional economists that the value of any commodity is the result of the amount of labor time that goes into its production.

What is interesting about capitalism is that since the worker exchanges his labor for money, and is separated from the product he or she is producing, then as a result, at the end of the day, the worker cannot buy the same amount of product.

Stated a little more clearly, a worker to survive will sell their labor power, but as an after effect of alienation, will end up being able to buy back only a portion of what they’ve created in the marketplace.

Over time though, as efficiencies are found and implemented, a surplus of value is created through the use of machines and other methods. Through these efficiencies, less workers are needed, the profits increase for the owners, and the class divide increases.

Paradoxically, this surplus is also a weakness, as to sustain growth, the workers need money to continue to buy up the products. Under pressure from the constant growth of the total product, the capitalists periodically fail to find new markets to take up the slack. This leads to crises of “overproduction”, capitalism’s classic contradiction, in which people are forced to live on too little because they produce too much – and crisis occurs.

The Materialist Conception of History

capitalism and marxism

The final question we are going to examine is “How did Capitalism originate and where is it leading?”

When looking at this question, Marx sees some contradictions to the general theory of Capitalism with itself.

How did Capitalism originate?

Out of the feudalism system, the lords and feudal rights were not beneficial for production and growth, and out of many political battles and uprising of the serfs, capitalism originated.

Now, capitalists had the freedom to pursue and maximize profits, and workers equally as “free” had the freedom to exchange their time for a wage. With these freedoms, technology, productivity and science (in addition to many other things) were able to grow without bound (in theory).

A few things come out of these freedoms which are not obvious to people who study capitalism:

  • First, the goal of maximizing profits will tend to lead to rapid growth when there is not the demand for these products. As a result, frequent crises occur as this growth is not sustainable.
    • Owners buy and create factories, machines, materials, and utilize their workers’ labor power if they believe they can make a profit, no matter the availability of these factors and with little thought for the need of the consumers.
  • Second, a class struggle is inherently a part of this system. The owners have a goal in mind: maximizing profits and securing more power, while the workers have alternative interests: higher wages, safe working conditions, flexible work arrangements, job security, and (some) power.
    • As the owners become more successful, they grow ever more powerful with influence in the state, schools, media, and other public institutions which keeps the workers down – a contradiction as capitalism seemingly should help everyone.
  • Third, the state ends up being a partner to the corporations instead of what is traditionally portrayed by democracy (a political system associated with capitalism); namely, the state is chosen and a servant to the people.
    • The state acts to restrain the masses of workers should potentially could be upset in this constant class struggle. This could come through a variety of ways, but it typically will occur from passing and enforcing various laws and providing economic subsidies.

As these contradictions become more prevalent and intense, neither the state or owners can restrain the mass of workers who want more and will act upon their interests to get their fair share of the pie. The process of overthrowing capitalism would lead to a socialist society which would be constructed through democratic planning with the thought to serve social needs instead of maximizing profit.

Eventually, Marx believed that Capitalism would lead to socialism, and if fully actualized, communism.

While the application of Marxism in various European countries has not worked, I do find value from considering his thoughts and looking to see how we can build upon them for a better society.

Capitalism over the past 175 years and Today

The last 150 years, from the 1830s to 2018, the world, and in particular, the United States has seen incredible growth in technology, products and goods, and the average person’s standard of living.

From reading textbooks, you would have thought this has been the greatest period in history, though I’m going to take a little more skeptical position.

Hindsight is 20/20, and I’m going to get into some more of the things which have lead to this in the next post (monetary policy and the economic environment are intimately connected), but looking at present day conditions, there is much to be wanted from many of the “working” class.

In the 1800s and early 1900s, union and organized labor were big pieces in the workplace which kept owners from exploiting the workers for the maximization of profits.

Starting in the 1950s, unions started to decline and as globalization started to occur, a drastic decoupling of wages and productivity occurred (there’s a piece here that is related to monetary policy as well, but again, that’s for a later post).

productivity vs wages graph

Fast forward to today, in the United States, you have a number of people who are not pleased with these statistics and struggling to make ends meet. Many corporations spend thousands and millions of dollars to get laws passed to help profits and instead of passing these profits on to the workers, they instead use them for their shareholders (which is fine, just not good in terms of inequality of the population).

(a slight tangent, it’s important to remember the Pareto principle in terms of the distribution of wealth. Regardless of where the starting point is, 20% of people eventually will have 80% of the wealth)

This post is a discussion about the economic systems in place and I will not take an opinion on the graph above because that’s not the purpose of this post. I’m not going to say, “I’m pissed at this and give me money”, and likewise, I’m not going to say, “Well, those people who can’t get money need better education and to work harder”.

We live in a complex society where there are 100s of different variables at play.

My point here is that for the majority of people in the United States, capitalism isn’t optimal – as seemingly predicted by Marxist thought and taken advantage of through the owners and state.

Let’s not ignore what has happened in the last few years in America: there has been unrest of many people as the stresses of every day life has gotten to them. You see it in the rise of radical leaders all over the world and the protests which seemingly happen weekly.

I’m fortunate to have been blessed into a situation where I can write about this and not have to worry about a solid paycheck – but many are not in this position.

What is Post-Capitalism?

At this point, a question comes into my mind: is capitalism working in 2018? What are the alternatives? Could there be a sustainable way to promote growth, achieve prosperity, and share wealth while also having incentives for innovation?

Enter a potential way to fix the problems of today’s world: post-capitalism.

Post-Capitalism is a school of thought which is gaining some traction in the economic community, and also a thought that many people (think Democratic socialists) are going towards but don’t have the entire picture or a rational thought of what it would actually look like.

Post-Capitalism is a theory that I was exposed to through Paul Mason’s book, Postcapitalism. The book was very well received in the media.

For me, it was very interesting to see how Mason took Marxist thoughts and ideas, and looked to see how he could balance Capitalist and Marxist thoughts for a better society and economy.

What are the goals of Post-Capitalism?

Mason argues the following should be goals of a post-capitalistic society focused on social good rather than maximizing profits:

  1. Rapidly reduce carbon emissions to stay below 2 °C warming by 2050.
  2. Stabilize and socialize the global finance system.
  3. Prioritize information-rich technologies to deliver material prosperity and solve social challenges such as ill health and welfare dependency.
  4. Gear technology towards minimizing necessary work, until work becomes voluntary and economic management can focus on energy and resources rather than capital and labor.

The Post-Capitalism Framework

Mason proposes that these goals could be accomplished:

  • Model policies thoroughly using abundant data before implementing them.
  • Tackle public debt, not through neoliberal privatization and austerity, but partly by closing down offshore banking and by holding interest rates below inflation rates.
  • Promote (partly through state support/regulations) collaborative/co-operative/non-profit forms of work and creative commons production, rather than highly unequal, autocratic and/or rent-seeking business models.
  • Break up monopolies or, where this is impractical, socialize them.
  • Socialize the finance system (via a transitional phase of re-regulating the finance sector).
  • Pay everyone a basic income.

The traditional personal finance and economic conservative inside me is struggling to see how this would be paid for, but after deeper thought, it makes sense to me. I’m someone who tries to consider all sides of a situation and not be tied to my position.

While this has been taken as a Utopian thought by some, there probably is some value in examining this theory in the coming years as things continue to transpire in the United States and abroad in the 21st century.

Which Economic System is Best?

Capitalism is cheered in the United States, as well in many markets around the world, but there are still flaws which are exposed over time.

I’ve touched on a lot here, and there’s a lot more I have to learn, but I hope this has given you some food for thought. Critical thinking is something I value and a principle of mine for personal development and growth.

I don’t know if the thoughts of any of the systems Capitalism, Marxism, or Post-Capitalism are the answer and key to a successful economy for all.

All I can do is continue to learn, present information on this blog, and look to inspire deep conversations to spur connected thoughts and actions.

I swear that each and every day as I dive deeper and deeper into my research and analysis, I sit here today in some mental state between confusion, enlightenment, clarity and peace, and hunger for more. I’m not an expert (not even close), but am learning more and more and loving my progress.

After learning about economic systems, I’d recommended reading about the banking system, and how the economy works. 

What is Capitalism, Marxism, and Post-Capitalism?


In this post, I’ve decided to embrace my non-traditional and alternative thoughts on the personal finance space and talk about a number of things that I’ve been battling with internally about money, the markets and investing. This is the first post in this series, and will set the stage for several posts to follow.

One of the principles of living with an abundance mindset is that the world is infinite in possibilities. In the 21st century here in the United States, people have never in their history had the freedom that we do now to do what we want with our time and money.

Want to go across the country tomorrow? It’s a possibility – get an airplane ticket and you are there! Something to eat? Head down to the grocery store or your favorite restaurant and you’ll be fed! Air conditioning on a hot day, or heat on a cold day? Spin the dial and comfort awaits!

Why am I bringing this up?

Unfortunately, this freedom is expensive, from monetary, environmental and energy perspectives.

This series is going to be a challenge to people in the personal finance community, economists (real and armchair), politicians (real and armchair), and anyone interested in investing. Thinking critically is so important if you are going to navigate this world successfully.

I’m pursuing TRUTH and will not stop short of it.

In this first post, I’m going to discuss a topic so frequently ignored and touch on the surface of some of the consequences of this ignorance.

The Earth is a Closed System

I’m sure this is an obvious statement to you: the Earth is a closed system.

Humans know the dimensions of the Earth (diameter of 7,900 miles) and have pictures of the entire planet from space.

In other words, you could say that the Earth is finite.

In mathematics (namely, number theory), finite sets are a collection of things which can be counted and the count of the collection is finite (less than infinity). Subsets of a finite set are finite as well, and are not infinite.

Why do I bring this up?

Something that is so frequently ignored by economists, journalists, personal finance experts, investors, and politicians is that the Earth is finite and limited.

Because the Earth is finite and limited, there are a few things that cannot be limitless: population, man-made energy, and money.

The rest of this post will be touching on population dynamics, energy, and give a preview of the rest of this series.

Population Dynamics in a Closed System

In a biology class in high school or college, you may have learned about population dynamics.

In a closed system, the population of individuals is governed by following differential equation (from Wikipedia):

The solution to this equation is the following:The picture of this equation is the following:

population growth picture

At the beginning of time, the growth is fast, and as you come up to the carrying capacity of the system, the growth slows.

The carrying capacity is a level such that the environment can sustain indefinitely, given the food, habitat, water, and other necessities available in the environment. The carrying capacity is a dynamic number based on technology, weather, and a number of other factors, but this number is always a finite number (because of the closed system assumption).

While this is great in theory, how is this playing out in the real world?

Population Dynamics in the United States

I live in the United States, so it’s natural to start there.

Here’s a graph of the United States population over time:

United States population over time

Over time, the population in the United States has grown, and since 1950, has more than doubled.

If you are paying attention, you’ll recognize something that’s a little off. The United States is not a closed system.

While performing my research for this post, I found some information on immigration and people leaving the United States, but to perform a thorough analysis, I’d have to come up with some sort of cohorting methodology which would be outside of the scope of this post anyway…

What I did find is that the growth of the core population of the United States (ages 15-64) is declining and leveling off over time:

working age population united states

The population continues to go up, but the core population is going down? Well, the majority of the change and growth in the population in the past 30-50 years is due to immigration.

What does this point to? A maturing population in a space approaching it’s carrying capacity? I’m not sure the exact reasons, as I’m not an expert on population dynamics, but from our thought exercise, it would seem that the United States population has matured and has reached stability (ignoring immigration).

But why… we will get to that in a little bit. Let’s talk about population dynamics on Earth.

Population Dynamics on Earth

Since we live on Earth, and this post is ultimately about Earth being a closed system, I present below the Earth’s population over the past 500 years:

world population over time
World Population (billions)

Again, we see massive growth around 1950, and little signs of this slowing down. But again, from population dynamics, we know that Earth is a closed system, so at some point, the population should level off.

Some scientists have us leveling off at 9 or 10 billion. Most projections have us between 6 and 17 billion in the year 2100.

Are we approaching our carrying capacity in the world today? Will people be able to increase the carrying capacity of the world? What factors will affect this?

These questions are outside the scope of this post, but leads us to my next point on the discussion of Earth being a closed system.

The Most Important Variable so Often Ignored: ENERGY

When you get out of bed in the morning, what do you do?

Your muscles move in such a way that allows you to roll off the bed and stand up. How do your muscles do this?

Your muscles tap into your body’s energy stores.

Where does your body get this energy? Easy, food.

Where does this food come from? The grocery store, which got it from a farm or food processor.

How did the farm or food processor get the food?

I think you get where I’m going.

ENERGY drives everything in our world.

Since energy drives everything in our world, why do economists, politicians, “experts” and talking heads ignore it? Let’s dive in a little more.

How Energy has Affected Population Growth

Again, I’m sure this is obvious to you since you learned this in history class in high school, but it’s worth repeating.

At the start of the 1800’s, the Industrial Revolution took place and brought extreme change to the way people went about their daily lives. Innovation and new technologies allowed humans to go places faster, do more work and produce things more efficiently.

Steam powered engines, the ability to mass produce steel and iron, and advancements in agriculture allowed people to live more comfortably and build up society to do things that were unattainable in the past.

Because of these developments, more people were needed for growth and building, and the population started to explode.

Over the next 200 years, more technological developments and growth allowed the population to keep its steady pace upwards. Electricity, oil discoveries, solar, wind, and nuclear energy advancements, all of these contributed to a surplus of energy which allowed humans to research and discover new and more efficient ways to produce food, build real estate, and create the society we know today.

Here’s the thing though: while yes, there have been strides in renewable energy, we cannot ignore the fact that the majority of the world is still very dependent on oil and fossil fuels. As we know, the Earth is a finite mass, and a subset of the Earth (oil) is also finite.

If energy drives growth and productivity, and one of the main sources of our energy disappears, what will be the result?

The Interplay of Energy and Earth Going Forward


While the financial media typically stays quiet about energy outside of the cost of different commodities, there is quite a bit of talk about it among academics and politicians (though not always as thoughtful or well-meaning as we may like).

Certain people argue that since humans are a dynamic species, we are adaptable to our different situations. Over time, if we run out of oil, we can find some other energy source which will fit our needs.

While this sounds great, in reality, people have been working on alternative energies for the past 50 years and these energies still aren’t as efficient as we’d like (or there is some other force blocking the widespread use – potential rabbit hole here).

Other people argue that the world is undoubtedly finite, and the rate at which we are using oil and other fossil fuels is unsustainable, and because we are so dependent on this type of fuel, we are in for a rude awakening.

Countries and businesses are spending more money, going into more debt, and getting less return on their investment for less of a yield.

Is this sustainable? Are new technologies on the rise? I don’t know.

I don’t know how the future will look, as I don’t have a crystal ball, nor does anyone else.

My point of this is to highlight that we cannot ignore something so fundamental to living and daily life in our macro projections.

Energy, population dynamics, and the environment drive the economy… it’s not the other way around

This statement is worth repeating since it’s so important: energy, population dynamics, and the environment drive the economy… it’s not the other way around.

I’ll be going into more detail in later posts in this series, but some statements which automatically fall out of this statement are worth mentioning here:

  • To grow an entity (business, government, family, etc.), energy is required.
    • Everything takes energy, and growth and progress needs a lot of it.
  • The economy is a subset of the environment and the world around us and is subject to the same rules from biology and physics.
    • Economists (with big egos and heads) think that the economy is the biggest thing, but without the environment, there is no economy.
  • The stock market will not go up forever. 
    • Infinite growth in a non-infinite system is a logical mistake. Note: this is not saying that the stock market is not a good place for investment or store of your wealth.

Again, I will touch on a number of these later on in this series, but wanted to make these statements here to get the ball rolling.

Keep these concepts in mind in the upcoming posts

As I’ve mentioned before on this blog, I’m not an expert, but want to write in such a way which will spark original and critical thought in your brain.

Consideration of the impact of energy on the economy, productivity, and markets is critical and should not be ignored.

The world we live on is not infinite, and as a result, we should take care in our discussions to consider this.

In the upcoming posts, I will be talking about some concepts which are fundamental to the financial system today:

  • What is money? What is debt?
  • How do banks work? What is fractional reserve banking?
  • What does it actually mean to want to invest in a stock?

I’m searching for the truth, and while I’m not there yet, this will be a fun set of posts for me to learn more about the world, and hopefully give you some good food for thought.

Thanks for reading,


place asymmetric bets to build extreme wealth

Becoming rich in a short amount of time is possible, but you need to bet big to win big. Looking for a big reward requires taking on a lot of risk – but is there a way to minimize your risk and not have to put a lot of money on the line?

This post is all about how to think about investing in terms of bets and asymmetric payoffs.

Can you become rich without needing a lot of money? Is it possible to make a lot of money without risking much money?

When I was 19, my best friend and I loved to go to the casino and play blackjack. A few times a month, we would take a $20 out of the ATM, head over to the casino, sit down at a $5 table, and see how we would do.

Sometimes we came out ahead. One time I won $200. Most times, we both lost our $20’s.

Blackjack is a game in which you don’t have an advantage. It’s a gamble, and not a great strategy for becoming rich with a small amount of money.

Becoming rich and financially free at a young age is one of my goals.

To become wealthy in a short amount of time without having a lot of money, I’ve needed to take on a fair amount of risk with my money. At the same time, I’ve needed to not be stupid and be mindful of where I’m placing that money and my bets.

In this post, I will be discussing the concept of expectation from statistics, talking about risk, reward, and investing, and finally, touching on how you can use asymmetric bets to grow your wealth without having a lot of money.

Note: the following discussion can also be applied to someone’s career, educational path, and seeking higher compensation. With that being said, I’ve chosen for this article to focus on asymmetric bets as they apply to building wealth.

investing for beginnersWhat is Risk?

Risk is a funny concept.

There are so many people who talk about risk like it’s something concrete or tangible.

As defined by Wikipedia, risk is the potential of gaining or losing something of value.

Risk has a negative connotation, but in my opinion, there is good risk, and, of course, bad risk.

To build wealth and become rich, taking good risks is key and can have a healthy payoff.

Before getting into what some of these good risks are, I need to talk about the concept of expectation and the expected value of a situation.

I’m going to do my best to explain this statistical concept in everyday language, so don’t be afraid if you aren’t a math person. 🙂

What is the Expected Value?

To talk about risk appropriately, I need to talk about the expected value and the expectation of a situation.

Speaking statistically, the expectation of a situation is the average outcome over all potential outcomes.

For example, let’s look at a coin flip.

The expected value of a coin flip is 50% of the time, you should expect heads and 50% of the time you should expect tails.

To go more general, let’s define as a scenario with outcomes 5, 10, 15, 20, and 100, and all of these outcomes having an equal chance (a 20% or 1/5) of being realized.

The expectation of is the average value over all outcomes, or putting this into an equation:

E(X) = (5+10+15+20+100)/5 = 30

What happens to the expectation if the chances of these outcomes change?

What if, respectively, the probability of these outcomes become 10%, 20%, 10%, 20%, and 40%?

Then the expected value calculation changes:

E(X) = 5*10% + 10*20% + 15*10% + 20*20% + 100*40% = 48

It is important to understand that not all outcomes in real life are equal.

What is an Asymmetric Bet?

An asymmetric bet is a bet in which the potential upside (earning potential or return in these investing scenarios) is much greater than the downside.

In other words, you might risk a small amount of money in order to potentially make a much larger amount of money.

I am using a combination of asymmetric betting and the Barbell Strategy, which I will explain below, to become wealthy without needing a lot of money.

emergency fundHow I’m Using Asymmetric Bets to Become Wealthy

While earning money, saving money, and investing money is a tried and true strategy for building wealth over time, there’s a catch: it takes a lot of time.

While yes, investing $10,000 a year in the stock market over 30 years will inevitably result in you becoming a millionaire, who wants to work for 30 years and then be wealthy?

$1,000,000 isn’t what it used to be, and really, once 30 years passes, will you have the health and energy to enjoy your wealth?

Personally, while I’m putting some of my money to work in the stock market, I’m also taking an active approach to building wealth.

House Hacking to a Big Asymmetric Payoff

When I was 20 years old, I started learning about how to build wealth. One of my favorite websites and blogs back in 2012 was Financial Samurai.

His article, The Average Net Worth for the Above Average Person had me hooked and thinking, “I’m above average, and wealth is my goal. Where do I need to be when I’m 25, 28, 30, 35? What can I do to build wealth?”

3 years later, I made my first financial splash.

I bought a house the day before my 23rd birthday. 

buying a house at 22When I bought my house, I had a negative net worth. I put less than 3% down, and I wasn’t very handy.

I had less than $2,000 when I moved in.

This was an incredible “risk”. But let’s look at the other side of things.

I had 3 roommates moving in with me who would be paying me rent which would cover roughly 90% of my mortgage. I had a great job – which at the time was paying me $63,000, and if all else failed, I could call up my grandpa and get his opinion on fixing something up.

Thinking in terms of expected value, and the context of this article, what were the possible outcomes and what were the odds of those outcomes?

  • There was probably a chance, maybe 5%, that I would get completely wiped out. 100% loss on my down payment of $10,000, ruining my credit, and no job.
  • There was probably a decent chance as well that some of the appliances would need to be replaced. Maybe this would have cost me $25,000 to update.
  • Another possibly is nothing would go wrong, I would rent out my house for 3 years, and I wouldn’t need to spend too much on repairs and maintenance.

What was the expected value of my investment looking out a few years? Initially, I was forecasting that my net worth would grow about $10,000 from owning this house and house hacking.

Over the last 3 years, I’ve grown my net worth through this house hacking.

I used asymmetric risk to my advantage, and as a result, I don’t have a student loan anymore. I don’t have an auto loan.

Now, I can continue creating a solid financial foundation for my future.

place asymmetric bets to build extreme wealth

Applying the Barbell Strategy of Nassim Taleb to Become Rich

One of my favorite books of all time is The Black Swan, by Nassim Taleb.

In the 90’s, Nassim Taleb was a trader on Wall Street and applied the Barbell Strategy to make money for his firm.

What is the Barbell Strategy for creating wealth?

Essentially, the strategy is to, with 90% of your capital, take little to no risk, and with the other 10% of your capital, invest in a diversified set of very risky asset investments.

This way, your investment portfolio will not be crushed when something goes very wrong; by only risking 10%, the maximum you can lose is 10%.

Let’s do an expected value calculation using the barbell strategy.

Let’s say we put 90% of our capital into something with a 100% chance of returning exactly 0%. With the other 10% of our capital, we have a 50% chance of returning 1000%, and a 50% chance of returning -100%.

What’s our expected value of our return under these conditions?

E(X) = 90%*(100%*0%) + 10%*(50%*1000% + 50%*-100%) = 45%

The expected value calculation yields an expected return of 45%. This is just an example, but something that happens in real life all the time.

personal finance is personal

Why Investing in the Stock Market Might Not Be as Safe as You Think

Over the last few years, I’ve read a number of articles on millionaires.

Since the stock market crash in 2008 and subsequent recovery, there are now many millionaires who mainly have their assets in equities.

Having $1,000,000 in a 401(k) and IRA is great in all, but what happens with a 40% downturn? You just lost $400,000.

I’m invested in the stock market, but am not blind to the fact that large downturns happen every 5-10 years.

Again, while the expected value for returns in the stock market is 7%, the potential drawdown is a little shocking to me.

What if the United States stock market experiences something similar to the Japanese stock market? The Nikkei 225 experienced a 65% drop in 1989 and things still haven’t recovered.

Having a “diversified” portfolio in equities is great in theory, but with medium risk, there is potential for large losses.

What I’d feel better seeing instead is multiple investment classes in your portfolio: real estate, cash, and consider some alternative assets.

My Strategy of Diversifying into Alternative Assets

Over the last year, I’ve been looking into alternative assets to continue to apply the barbell strategy in my financial life.

Everyone wants to find the next Amazon, the next Apple, or the next Bitcoin to throw 100% of their money into and become wildly rich.

That’s stupid to do, and is not what I’m recommending – or what I’m talking about in this post.

Putting a little bit of your wealth into risky assets is the way to go if you want to build wealth offensively, and become rich in your twenties and thirties.

There are three asset classes I’m looking at in particular. These are some things I’m experimenting with. Please assess your own financial situation – I’m not a financial adviser, and would urge you to please do your due diligence before investing in anything.

Here are some assets classes I’ve thrown a little bit of money into:

  • Cryptocurrencies
    • The overall cryptocurrency market is under $1 trillion. The stock market in comparison is around $75 trillion.
    • Personally, I believe the cryptocurrency market could reach $2 trillion, and that would be a 400% return from prices today.
    • I don’t think it will go to 0 as many pundits and people say – institutional money has yet to enter, and now extremely rich people like George Soros are looking to get in, making it seem like it could be a decent bet going forward.
  • Precious Metals
    • Since 2011, silver and gold have been crushed. For example, silver, from a peak of nearly $50, is now sitting around $17.
    • Could silver get back to $50? What about $35?
    • This seems to be a decent asymmetric bet in the next few years, and something I’m experimenting with.
  • My Own Businesses
    • I have a solid day job which is bringing in great income, but to really build wealth, I need to create more and earn more.
    • I’m experimenting with this blog and other side hustles– if these start making a few hundred to a thousand dollars a month, I’ll be creating wealth fast for myself without a lot of money initially invested.

If the barbell strategy is something you think would be valuable to you, the next steps to do your due diligence and look to place some asymmetric bets to become rich.

Finding Expected Values in Personal Finance and Investing

With our knowledge of the concept of expectation, we will now use it to think about asymmetric bets and the expected value of returns of different investment classes.

Hopefully, this will get you thinking about what you can invest in for your financial future.

Before investing, it’s critical to first track your income and expenses, and establish an emergency fund.

After doing these two things, then it’s appropriate to start thinking about getting fancy with your investments.

Remember, the expected value of an event can be thought of as the average outcome. 

The Expected Value of Returns of the Stock Market

On average, the return of the stock market has been roughly 7% a year over the last 100+ years.

Using the language we’ve built up, we could say the expected value of returns for the stock market is 7% a year.

That is not to say there will not be years where there could be a 20% return, or there could be a -20% return.  This is saying that on average, we can expect a return of 7%.

While this 7% does carry some risk, many investors consider the stock market to be a fairly safe investment.

The Expected Value of Returns of Real Estate

Every property and real estate deal is slightly different, and there is also leverage to consider, so there’s no definitive number for the average return for real estate. With that said, for investors, returns on real estate are generally a little more than the stock market.

While the numbers vary, real estate will typically return around 10 to 15% a year.

Thinking about the risks associated with this return, a single house can have a whole bevy or issues: pipes frozen, appliances needing to be replaced, etc. which will eat into the return.

Even though there is risk for there to be reduced returns, with leverage and strong cash flow, real estate can be a great investment.

The Expected Value of Returns for Your Bank Account

This article is not about inflation, how the economy works, and how banks make money, but for all intents and purposes, the return of your bank balance is 0%.

Your money is guaranteed by the government, and while yes, you do get interest paid each month on some types of accounts, relative to inflation, you are losing.

While I believe it’s critical to have an emergency fund, an emergency fund and cash savings is for peace of mind rather than being a source of wealth creation.

The Expected Value of Returns on Debt

The return on debt is precisely the interest rate you are paying on your debt.

Your 5% mortgage has an expected value of a -5% return for your wealth.

Debt has a negative impact on your wealth over time.

The Expected Value of Returns on a Business

This is a tough one. I’m a huge believer that you can use businesses to grow your wealth – and this is something I’m trying to do.

Some people are more successful than others. My current efforts have resulted in a negative hit to my net worth, but I’ve learned a ton.

The possible outcomes here could be $1,000,000, -$15,000, $10,000, or anything in between.

The expected value of your return in business is also dependent on growth, time, and industry.

With this many variables, I’m not sure the expected value here.

The Expected Value of Returns on Cryptocurrencies

Another tough one, and one I’m currently trying to answer.

Let’s look at Litecoin: in 2017, Litecoin returned roughly 5000%.

Could it go to 0? Absolutely. Could it go up another 5000% in 2018, 2019, and 2020? There’s a chance.

What is the expected value for returns for cryptocurrencies? I have no idea, but it could be an interesting bet to try to build wealth for the future.

learn to investBuild Wealth Without Risking a Lot of Money

After getting your emergency fund in place, the next steps with your additional savings should be investing in assets you understand, and building a robust investment portfolio.

Your goals may not include extreme wealth or financial freedom at a young age, but having more money is always better than having less money.

If financial freedom is a goal, it is possible to become rich without needing and risking a lot of money.

The concept of using asymmetric bets is probably a very different thought. I hope this post inspires you to continue to look to expand your perspective on the world, and live with an abundance mindset.

There are so many opportunities out there to make money in the world. We just need to provide targeted value and be compensated for your efforts.

Readers: are you utilizing asymmetric bets to build extreme wealth without needing a lot of money? Are you playing it slow and steady instead? What are your thoughts on alternative assets?


How to become rich without a lot of money

How to become rich