Why You Need Big Picture Investing Now!

If you want to reach financial independence, you’ve got to understand big picture investing. I’m going to break it down for you, so you can recognize why you need to invest, in order to achieve financial freedom.

Your Retirement Destination

First off, you have to decide how much money you will need to retire on per year. This is your ultimate destination (or end goal)

A Quick Retirement Calculation

Calculating how much money you will need to retire on per year can be pretty easy actually. Let’s say, for example, you are 25 years old now, and feel comfortable with the idea of living off of $6500/month (in today’s money value) during your retirement starting at age 65.

Your Perpetual Income Machine

This lovely $1.615 million would theoretically provide you with $64,600/year indefinitely, which would also adjust up for inflation during retirement, given a 7% annual return. It will even allow you to leave a bunch of money to your heirs! Sweet!

How Do You Save That Much?

1. You can either save the entire 1.615 million from your work income alone, or… 2. If that’s not possible (which likely it’s not), you can try to grow whatever amount you can save, by employing an “investing vehicle” of some variety. Aha!

Enter…Your Big Picture “Investing Vehicle”

Your “investing vehicle” is whatever you’re going to put your savings into, like a stock or a bond, or really any investment you choose to put your money into.

1) Public Financial “Markets”

The public markets are basically the entire financial industry. All the terms you hear thrown around at the office, by your friends or on the news—stocks, bonds, commodities, index funds, ETFs, mutual funds, options, derivatives, mortgage backed securities, REITs, etc.

The bottom line for big picture investing: the best you can expect to do in the public markets on average is 10%—on the high side. However, since investing in “all stocks” is considered somewhat risky, managers often shoot for a more diversified portfolio delivering 7-8%.

The bottom line for big picture investing: the best you can expect to do in the public markets on average is 10%—on the high side. However, since investing in “all stocks” is considered somewhat risky, managers often shoot for a more diversified portfolio delivering 7-8%.

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