The 2020 pandemic and subsequent lockdown is a wakeup call for every investor, and even those who just want to save their money for retirement.
As even some blue-chip companies like Disney have been falling down due to the changing market, while video game companies, online gambling, and delivery services are on a steep rise.
Although the correction is imminent, it probably won’t be enough to change the direction in which the market is going, and will allow whole new auxiliary industries to rise to support these new businesses.
Additionally, as automation takes an increasing number of jobs, we can predict that human services will become a focus for many. While we are fine with robots and machines serving in the background, we want to see a human face and have some interaction with a regular person.
Aim for FIRE
Financial Independence, Retire Early.
While this is a very unpopular term amongst large investors who can already retire, it is slowly emerging as the best way for an average person to live their life. In many ways, FIRE is the quiet subversion of consumerist capitalism that only works with the free market and individual liberty.
What you aim to do is to reduce your overall spending by removing unnecessary purchases from the equation. And, the first question here was: ‘’what is unnecessary?’’
Easy, any item you are buying for social browning points and are not useful to you as a person but mostly for your reputation amongst your friends is a useless item. Rather, investing in skills and abilities, learning to play an instrument, taking up a sport, all of these are better ways of social stratification than simply material possessions.
The money you save, you should reinvest. At first, these investments will be in slow and stable stocks and portfolios. But, as the number grows, you might push into more speculative instruments.
The final goal is clear. You should, if possible, retire from your regular job by the age of 50 and keep the same lifestyle as you did before. Now, you will be able to use that extra time to either give to your family and friends or to do the things you want, to make a lifetime investment in yourself.
Making a Strong Base
Before you start investing in emerging markets, you will need to have a solid financial base. This doesn’t mean always having a lot of savings, but simply contingencies for multiple possible scenarios.
Even though the numbers for the UK are better than those in the US, around a third of all Brits have less than 1500 pounds in their savings account, and one-sixth has no savings at all. Ideally, you would want to have zero outstanding debt and at least three monthly salaries in your savings.
Once you have that, your first investment should be in something really stable. Investing in large portfolios and blue-chip companies is a good way to start. Ideally, this should rise in value to the size of five annual salaries. This shouldn’t be touched until you retire, and all the money coming from this account should be reinvested in itself.
Finally, you have your semi-speculative investments where you can expect bigger gains and higher risk. While this sounds like gambling, it is more like an educated guess which companies will rise and which will stagnate. Ironically, investing in online gambling seems to be a good idea at the moment.
By simply observing how many new casino operators have emerged in the last few years you can see that the market is on the rise. And, as more people start working remotely entertainment will move to the home as well, including gambling and sports betting.
Be Ready to Advance and Retreat
If you already have your strong base, financial agility will be essential for a small investor. The ability to act quickly to avoid risk and downfall, or to use an opportunity that has been presented is the best way to make your equity grow faster than the average.
But, the only way to do this is to have your everyday life secure and relatively isolated. If you are actively using your financial successes to prop up your social status or change your lifestyle, you will become a slave to that success and won’t be allowed to have setbacks.
This practice will increase your stress levels and deny your ability to relax and wait for a more opportune moment to act. Being ready to advance and retreat in your financial investments also means that you are able to stay in place without it affecting your bottom line.
These new tendencies not only request a change of instruments you will use, but a change in perspective as well. The new goal isn’t to become insanely wealthy for the sake of others who will inherit and subsequently squander that wealth, but earn enough to lead a happy life, independent of those who want to drag you away.
To paraphrase Karl Marx, the essence of freedom is financial independence. Ironically, that statement is more true in modern capitalism than it ever was in any socialist nation.