How to be boring with your money

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Today’s headlines are awash with new and flashy investments like non-fungible tokens (NFTs), memes stocks, and cryptocurrencies. It can be tempting to invest in the latest craze, but having “boring” investments is just as important.

On July 29, CNBC’s Mad Money host Jim Cramer presented a segment at the start of his show explaining how boring investing shouldn’t be overlooked. His example was Carrier Global Corp (CARR), a manufacturer and global leader providing HVAC services, refrigeration and fire and safety solutions.

An incredibly non-sexy investment has given investors a nice return on their investment. In the past five years, the stock has risen 340% to date. And since March 2020, when the closures for the Covid-19 pandemic began, the share price has risen 34%. Past performance is no guarantee of future returns, it doesn’t mean you should invest in CARR, but uncool investments can work very well as well.

Cramer’s point was, “You can still make a lot of money by being boring.” And this theory can be broadly applied to many of your financial decisions.

Here are four ways to get bored with your money so you can keep building your wealth with ease.

Invest in the S&P 500

The S&P 500 is a favorite of many investors for stable and consistent returns. The S&P 500 is made up of 500 of the largest companies in the United States and includes popular stocks such as Apple, Tesla, and Facebook.

When you invest money in an S&P 500 index fund, you buy a unit of each company listed in the index. This helps produce stable (long term) returns and protects your investment against serious risks. However, the S&P 500 has years where it is in the red. But to add to his credibility, Warren Buffett has regularly suggested that ordinary investors should focus on investing their dollars in the popular index – and for good reason.

Instead of Bitcoin or the latest stock of memes, investing in this index regularly can be very profitable. Since 1950, the S&P 500 has produced an annualized return of 11.4%. In fact, this index has consistently outperformed over 90% of actively managed mutual funds, further reinforcing the feeling that boredom can always pay off.

Assuming that same return, if you were to invest $ 100 per month for 30 years in an S&P 500 index fund, your brokerage account would be worth over $ 287,000 – after contributing only $ 36,000.

Rich Arzaga, Certified Financial Planner and Founder of Cornerstone Wealth Management, reiterates this strategy to his own clients. “Sexy can be a danger to a portfolio. With proper financial behavior, boring returns have been respectable. Respectable should be the new sexy.”

To start investing in the S&P 500, you can open a brokerage account (including an IRA and Roth IRA) with Charles Schwab or Fidelity, or even consider a robo-advisor such as Wealthfront or Betterment, which often allocates a portion of your portfolio to an S&P 500 index fund.

Wealth front

On the secure Wealthfront site

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle chosen. Minimum deposit of $ 500 for investment accounts

  • Costs

    The fees may vary depending on the chosen investment vehicle. No account, transfer, transaction or commission fees (fund ratios may apply). Wealthfront’s annual management advisory fee is 0.25% of your account balance

  • Premium

  • Investment vehicles

  • Investment options

    Stocks, bonds, ETFs and cash. Additional asset classes to your portfolio include real estate, natural resources, and dividend-paying stocks

  • Educational resources

    Offers free financial planning for college planning, retirement, and home buying

Use a cash back credit card and invest your rewards

Your credit card is another tool that is part of your daily life that can often seem boring and tedious to manage. Your daily purchases can actually earn you cash back rewards that you can use to “passively” invest in the market.

In the world of credit card rewards, there are two types of credit cards: travel rewards and cash back. While travel rewards cards have a ton of perks when you can travel first class and brag to friends and family, there’s nothing wrong with making money.

Select calculated how much cash back the average American can earn in a year with the Citi® Double Cash card, which offers cardholders 2% cash back on all qualifying purchases (1% cash back when you buy, plus extra 1% when you pay).

We worked with location intelligence firm Esri, who provided us with a sample annual expense budget of $ 22,126. The budget includes six main categories: groceries ($ 5,174), gasoline ($ 2,218), restaurants ($ 3,675), travel ($ 2,244), utilities ($ 4,862) and general purchases ($ 3,953) . With that in mind, using a card like the Citi® Double Cash Card will net you $ 443 each year.

Yes, you can earn better “value” with a travel rewards credit card like the Chase Sapphire Preferred® Card, but simplicity and savings are the boring solution with a potential long-term benefit. However, consider that having multiple credit cards could be very beneficial to you as the welcome bonus for Sapphire Preferred is worth a lot. Currently, the card offers 100,000 bonus points after spending $ 4,000 in the first three months of card membership, which is $ 1,000 in cash back. You could take that money and then invest it in the market.

In addition, there are credit cards available that will invest your money in an index fund like the S&P 500, like the Fidelity® Rewards Visa Signature® card or the American Express Platinum Card® for Schwab.

Citi® Double Cash Card

  • Awards

    2% Cash Back: 1% on all qualifying purchases and an additional 1% after paying your credit card bill

  • Welcome bonus

  • Annual subscription

  • Intro APR

    0% for the first 18 months on balance transfers; N / A for purchases

  • Regular APR

    13.99% – 23.99% Variable on purchases and balance transfers

  • Balance transfer fees

    Either $ 5 or 3% of the amount of each transfer, whichever is greater

  • Foreign transaction fees

  • Credit needed

Shop for Better Interest Rates

Your housing costs are probably the biggest part of your monthly budget and often seem like a burden to you. But for many, there is a simple and effective way to reduce that bill, and that doesn’t mean cutting back on your lifestyle.

More than a year and a half since the start of the pandemic, interest rates remain at record levels. For homeowners, now is a great time to refinance their mortgage at a lower rate and possibly a lower monthly payment.

However, there are a few things to consider before starting the home refinancing process:

  • Home equity: As home prices continue to rise, more and more homeowners find themselves with a strong position in their home equity. In order to refinance, the rule of thumb is that you must have at least 20% equity in your home, which means you’ve paid off 20% of your home. However, contact your lender to see what your options are.
  • Credit score: Make sure to watch your credit score. If your credit score isn’t where you want it to be, work on improving it before refinancing your home to get the best possible interest rate.
  • Refinancing fees: Refinancing your home is not free. It will cost you around 3-6% of the total loan amount to be refinanced. In some cases, the costs of refinancing can outweigh the savings, so be sure to run the numbers before modifying your mortgage. However, each lender will charge a different amount, so be sure to shop around for the best deal.

Refinancing your home is a boring, yet effective and easy way to save money. To start figuring out if this makes sense for you, use a home mortgage refinance calculator to help you calculate the numbers. You can use the savings and invest it in the market or use it to pay off your mortgage even faster.

Reanalyze your invoices for potential savings

The most boring method of all these potential money generators is to take a look at your monthly bills and find costs to cut. It’s probably the last thing you want to do in your spare time, but the effort can really pay off.

Here are some ideas to get started:

  • Analyze your credit card bill: Are you paying for subscription services that you don’t use or need? Are you spending a little too much to eat out since the restaurants reopened? It’s the easiest way to see a statement of your spending and figure out where to cut back.
  • Bank charges: Your financial institution may charge you overdraft or management fees, which eats up your monthly cash flow. If so, consider asking your bank for a one-time refund or even changing banks and getting a checking account at no charge.
  • Shop your insurance rates: You are probably paying for various insurance policies including auto, life, health, cell phone, and home / renters. Take a close look at each policy to see if you can either reduce your coverage or change providers for a better rate.
  • Cell phone / cable bill: Cable and cellular service providers are notorious for raising prices with little or no notice. Consider looking at your bill to see what services you can cut or call your provider to see if there are any specials that can lower your monthly cost. Also, consider switching providers or, in the case of your cable bill, cutting the cord completely.

At the end of the line

It’s easy to get carried away by the latest financial craze. But before you consider these investments, know that you can achieve great returns with very little effort and in a few simple steps. And there are other ways to easily reduce recurring costs and put your savings back into the market.

While Jim Cramer suggests investing in boring stocks to increase the likelihood of profit, the above steps are simple and effective methods to increase your net worth and get you closer to retirement.

Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.


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