How to Make Money in the Market without Really Trying

OK – so investing really isn’t your thing.  You don’t want to learn that S&P stands for “Standard and Poors,” and you don’t want to learn about Dow Theory and the significance of the Dow Jones Industrials or the Transportations.  You just want to make a little money in the stock market without really trying.

The first thing you would do is to save up a few thousand dollars.  Sorry, you need to have money to make money.  $3,000 to $5000 would do the trick.  Do this by spending less than you are making.  Some ideas are to order water (tap, not bottled)  when you go out, eat lunch at your desk a few days a week, or cook steaks at home rather than going out to one of those ridiculous steakhouses (yeah, Ruth’s Chris, I’m talking about you and your $7.50 baked potato) and put the money you would have been spending in your investing account.

You would then find an online broker like E-trade and buy shares of an S&P500 ETF.  This is a large cap fund, meaning that they buy shares in large, multinational companies, but you don’t need to know that.  It is also an Exchange Traded Fund (ETF) on an index Fund, which means it has really low fees, but you don’t need to know that either.  The only thing you need to know is that you may see some dips once in a while – like about 40% during the 2008 crash – but that the fund will recover if you just hold on.  And that it will grow like you wouldn’t believe when you least expect it.

The next thing to do is to save up another $3000-$5000 and buy a Russell 2000 ETF.  This is a small cap fund, again, not that you would care.  This means it invests in small companies that have a lot of room for growth.  This fund will have a lot of volatility, meaning the price will move around a bit more than that of the S&P500 ETF, but it will also grow faster over long periods of time.  There’s the key – long periods of time.  Like years.  Decades.  Careers.

As time passes, save up a bit more, buy some more shares of either ETF.  Maybe whichever one looks cheap at the time.  Maybe the S&P500 ETF on even months and the Russell 2000 ETF on odd months.  Just keep about the same amount in each fund.  After a while, maybe throw an REIT into the mix, like Vornado Reality, Apartment Reality, or even American Tower (which invests in cell phone towers).

Will you do a lot better if you took more time? Maybe.  You could spread your investing out to a few more funds, reallocate funds about once a year, and maybe try to buy more on market dips.  You might make a few more percent a year, but not that much more.  Will you do better than you will in a savings account with this little effort?  Absolutely.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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