You’ve heard that you should be investing your money. But there are so many options screaming at you.
Stocks, bonds, real estate, precious metals, managed funds, ETFs, indices, hedge funds, foreign exchange…
Where do you start? In this video, I give you my top 2 recommended places to invest the proceeds of your business.
INVESTING IN AN INDEX FUND
I invest much of my money into index funds. Top investor Warren Buffett has long been a proponent of index funds. In 2016, for example, he wrote:
“Over the years, I’ve often been asked for investment advice, and in the process of answering I’ve learned a good deal about human behavior. My regular recommendation has been a low-cost S&P 500 index fund.”
The S&P 500 is an example of an index fund. It is a fund that invests into a selection of 500 top companies. When you do this, you spread your money across these 500 top companies. If one of those companies fails over the coming decades, you won’t lose all your money, like you would if you invested into that company only. Plus, the fees for index funds are much lower than traditionally managed funds.
The purpose of an index fund is to match the return of the total market. If the total market returns 10%, you’re setting yourself up for a good return over the next 30–50 years. To get started, Vanguard is a popular index fund manager.
REINVESTING INTO YOUR OWN BUSINESS
You can get better returns than 10% by reinvesting the proceeds of your business back into the business again. This is what I do with the majority of my own money.
The Sunset Del Mar Resort in Costa Rica, which I purchased in 2016, is an example of reinvesting into my own business.
Before we owned our own resort, we used to spend a lot of money renting out resorts to host our masterminds. We once spent half a million dollars on a single one. As we went from two masterminds per year to nine per year, this wasn’t ideal.
By buying our own resort, we were able to save money on mastermind expenses, increase our margins and afford to spend more on the customer experience. Plus, holding our masterminds keeps the resort profitable. The masterminds allow us to occupy the resort at a rate of near 100%, compared to the resort industry average of 70%.
It’s a great investment. Think about how you can reinvest into your business in a similar way.