It seems that everyone is trying to get rich quickly these days. All of the hypes from the cryptocurrency market have turned our economy upside down. In the 1980s, an average American would have only invested in 401ks, bonds, stocks, and real estate. However, if you ask a millennial or Gen Z, you will find that they will have investment allocation in Bitcoin, Ethereum, and other alt-coins. Thanks to the social media platform, we can now understand finances and access various mentors through the internet. Unfortunately, not everyone can become a millionaire overnight, despite all the hypes from “cryto-millionaires”. It is often overlooked how much hard work is needed to be successful. In this article, I will explain how long-term strategy can be helpful for your financial portfolio. If you follow these rules, you will become a millionaire by the time you retire.

ETFs, also known as exchange-traded funds, are excellent for your long-term investment portfolio. It is an asset class in which a financial institution buys stocks based on a stock market index, like the S&P 500. These are crowded funded platforms that allow each investor to buy a small portion of all the successful companies. For example, Berkshire Hathaway stock cost about 460,000 dollars per share in May 2022. You, as an investor, most likely not be able to afford that. Therefore you can dip into BH if you purchase an ETF that contains BH at a very tiny fraction of the cost. Most ETFs are very low-cost to manage, meaning that they do not require a lot of overhead for the public to invest in.

Let’s dive into why ETFs can make you a millionaire. These are some of the reasons why you should invest in ETFs in 2022.

1. It is low risk.

Because you are investing in an index that tracks the progression of at least 500 to 700 companies, the risk is low. The likelihood of all of these companies failing together is likely zero. On the contrary, if you invest in just one company, you may have a chance that this company may not do well. And you will lose all of your investments. The safest way to invest is to invest in a low-cost ETF to mitigate this risk. Warren Buffett recommends that most investors can become millionaires by placing their money in a low-cost index fund by the time they retire.

When we are younger, we can take extra risks in our investment journey. We can invest in funds and stocks that are much higher risks than people who are going to retire in five years. As we age, our working years are less, and therefore we cannot take on as much risk. Imagine if you lose all of your retirement savings at the age of 60! That will undoubtedly be a horrifying experience. Furthermore, it will be much more challenging to bounce back from our losses. If you invest in the SP500 and expect a positive return, you must invest at least five to ten years to expect a healthy ROI. This is because an average length of a recession is about 3.5 years.

2. It diversifies your assets and allows you to dip into different sectors.

Most ETFs invest in stocks that belong to a particular sector, therefore diversifying your investment. The most popular ETFs are from the Vanguard ETF, such as the VOO and VTSAX. These ETFs are low-cost index funds that track the S&P500, heavily invested in the tech sector and the large-cap market in the United States. But there are also other ETFs offered by other financial institutions, such as the QQQ and SPY from Invesco. BBUS is the large-cap ETF offered by JP Morgan. QQQ only contains a large-cap market, unlike the VOO from Vanguard. Therefore, you can find an ETF that fits your interest. I use the Vanguard VOO or VTSAX. They have the lowest cost compared to the other index funds, hence saving you a lot of money on management fees. They are also widely sold by many banks in the United States, and it is publically traded on the New York Stock Exchange, making it extremely easy to invest.

3. You can easily buy them with any trading platforms

It is now easier than ever to trade any of these ETFs. If you watch any financial Youtube channels, there are many ways that you can go about your investments. The easiest way may be to use a roboadvisor from your financial institution. For example, Vanguard and Chase offer roboadvisor at a reasonable price. You do not have to manage your portfolio and trade actively. With the roboadvisors, they will manage the portfolio for you. Interestingly, many financial reports suggest that most active day traders do not make more than investors that devote their earnings to a long-term strategy. Over 90% of active traders on Wall Street do not beat an average investor who put their money in the S&P 500. Regarding trading platforms, You can use Robinhood, Webull, or even set up a brokerage account with any bank to start trading. Just understand that there are associated fees when buying and selling these  ETFs. You are also liable to pay capital gain taxes if you make money from your trading. The bank will calculate these, and you will be given a tax form at the end of the year.

Investing is a critical component of achieving financial freedom. I recommend a slow and steady investment strategy, aka dollar-cost averaging, rather than trying to become rich overnight. If you are interested, I follow the Money Guy Show on youtube, and they provide a lot of statistics on why the dollar-cost averaging strategies beat any daytraders in a heartbeat. 

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The Emporer of All Maladies: https://amzn.to/39Gj2ca

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