Wealthy Forever: Achieve Financial Freedom with Smart Investing
Achieving financial freedom is simpler than you might think. You don’t need to be a financial expert, a math genius, or smarter than the average person. In fact, sometimes overthinking can be counterproductive.
What truly matters is discipline, a steady income, and keeping your expenses below what you earn. This page provides straightforward advice to help you reach your goals without the usual financial advisory sales pitch.
Securing your financial future and gaining independence is within reach for anyone and everyone. With just a few basic steps—backed by research and practical examples—you can start your journey. Intelligence isn’t the key here; self-restraint and consistency are. We’ll guide you through the essentials and explain why this approach works.
Three Easy Steps:
Open an Account: Choose a trusted brokerage or investment platform to create your account.
Transfer Money: Set up a monthly transfer to automatically fund your investment account.
Buy a Global Index Fund or ETF: Select a broad, low-cost index fund or ETF to invest in, ensuring diversification across global markets. The broader the fund and the lower the fee the better. Examples of such funds and ETFs can be found here
You can get started today by opening an account on one of these selected brokerage platforms: Degiro (Restricted to most parts of Europe) or Interactive Brokers (Available globally)
If you want to know why we have selected these platforms, please read more on this page brokers compared.
By following these steps, you can harness the power of passive investing to build a secure financial future. Read on to see why this approach works.
Why it works:
Proven Strategy
At Wealthy Forever, our investment strategies are grounded in Nobel Prize-winning research and modern academic studies. This extensive research demonstrates that a disciplined, passive investment approach consistently outperforms market-timing attempts, providing you with a reliable path to financial success. Nobel Prize-Winning Research Supporting Wealthy Forever’s Investment Philosophy
Why do we want to be exposed to the global stock market?
On average, the stock market(S&P 500) has grown by 10,5% per year including reinvestment of dividends since 1957.[1] This means that $100 invested in 1957 would be worth $72 148.05 today. Let’s experiment with the assumption that you have zero dollars invested today and managed to invest $500 per month in the S&P 500.
How much would you have in 30 years?
You would have over $1 000 000.00 assuming historical returns. This is the power of compounding interest. Compound interest allows your investments to grow exponentially over time because you earn returns on your initial investment as well as on the returns previously earned. Try it yourself with this offical american goverment compound intereset calculator.
Diversification Made Easy
By investing in a wide range of assets, you reduce risk while maintaining potential returns. Wealthy Forever's recommended index funds and ETFs provide a balanced mix, allowing you to focus on growing your wealth. Investing in a global index fund spreads your investment across industries, regions, and economies, reducing the impact of downturns in any single market.
However, the farther you stray from a global index by concentrating your investments in specific sectors or regions, the more likely you are to lose out on risk-adjusted returns. Concentrating on a particular sector or region may increase your exposure to specific risks, such as economic downturns, political instability, or technological disruptions within that sector. This approach can lead to higher volatility and potentially lower returns over time, compared to a well-diversified global index fund.
By staying diversified and sticking to broad, low-cost global index funds, you maintain a strong risk-adjusted return profile, which is key to building long-term wealth.
Market Efficiency Advantage
The Efficient Market Hypothesis tells us that stock prices reflect all available information, making it tough to consistently beat the market. Our recommended index funds offer a smart and efficient way to harness market growth.
Behavioral Insights for Better Decisions
Wealthy Forever helps you navigate common investment pitfalls like loss aversion. By automating your investments, you can stay on track and make rational choices that benefit your long-term goals. However, it’s also important to be aware of specific behaviors that can derail your financial success. Two of the most common pitfalls are chasing high returns and panic selling during market downturns.
Chasing High Returns: This happens when investors jump into the latest "hot" stock or sector in the hopes of quick gains. While it might be tempting, this approach often leads to buying high and selling low, as these investments can be highly volatile. Instead, sticking to a disciplined, long-term strategy focused on broad, low-cost index funds is more likely to yield steady, reliable returns.
Panic Selling During Market Downturns: When markets decline, it’s natural to feel anxious. However, selling your investments out of fear during a downturn locks in your losses and prevents you from benefiting from the eventual recovery. Historically, the market has always rebounded over time. By staying invested and continuing your regular contributions, you allow your portfolio to recover and grow in the long term.
Why Passive Investing Outperforms:
While it might be tempting to believe that an experienced fund manager can consistently outperform the market, the reality is quite different. Numerous studies have shown that most active fund managers fail to beat their benchmark index over the long term. In fact, over time, the majority of actively managed funds underperform compared to passive index funds.
One significant reason for this underperformance is the cost associated with actively managed funds. These funds typically charge higher fees for management and transaction costs. Even if a fund manager can occasionally outperform the market, the higher fees can significantly diminish your overall returns.[2]
The Cost of High Fees:
Consider this: if an actively managed fund charges a fee of 1-2% per year, it might not seem like much at first glance. However, over the long term, this seemingly small percentage can eat away a large portion of your returns due to the power of compounding—working against you instead of for you. The higher the fees, the less you benefit from the full potential of market growth.
Why Low-Cost Index Funds Are Superior:
Low-cost index funds and ETFs, like those we recommend at Wealthy Forever, offer an efficient way to capture market returns without the drag of high fees. By minimizing costs, you maximize your net returns, which is crucial for building wealth over time. This is why choosing broad, low-cost index funds is a smart strategy that aligns with your goal of achieving financial freedom. Explore how you minimize costs even more on Degiro here.
Think Long-Term, Live Wealthy
Additionally, having a financial buffer to cover several months of expenses is crucial. This safety net ensures that you can continue your monthly savings plan even when unforeseen expenses arise, keeping you on track toward your long-term financial goals.
Our approach focuses on the power of compound interest, encouraging you to invest consistently over time. This reduces stress from market fluctuations and helps you build a wealthy future.
Congratulations on Taking the First Step!
You've made it this far, and that shows your commitment to achieving financial freedom. Now that you understand the basics, it's time to take action. Your first step should be to open an account with a recommended broker. Read our DEGIRO review orcheck out our Interactive Brokers review to see which platform suits you best. Once you've chosen your broker, set up automatic transfers, and select a low-cost global index fund to start investing today. By doing so, you'll be well on your way to securing your financial future. Examples of such funds and ETFs can be found here.
Remember, the key to success is staying disciplined, avoiding common pitfalls, and trusting in the power of a diversified, low-cost, passive investment strategy. The sooner you start, the sooner you’ll begin to see the benefits of compounding interest and the growth of your wealth over time.
Don’t keep all this financial wisdom to yourself—share the wealth! If you found this helpful or even mildly interesting, pass this page along to friends or family who could use a little nudge toward securing their own financial future. After all, what’s better than getting wealthy? Getting Wealthy Forever together!
Welcome to the Wealthy Forever movement—where smart investing leads to a life of financial independence and security!
Disclaimer: The information provided on this website is for educational and informational purposes only and does not constitute financial advice. Investing in financial markets involves risk, including the potential loss of principal. Past performance is not indicative of future results. We recommend consulting with a qualified financial advisor before making any investment decisions. Wealthy Forever is not responsible for any investment decisions made based on the information provided here.
We encourage you to conduct your own research and consider your personal financial situation when making investment decisions.