5 Investing Strategies to Achieve Financial Independence Faster


5 Investment Strategies to Achieve Financial Freedom Fast

It is every Canadian’s dream to retire before the age of 40, but it is not always possible. However, Millennials have joined the FIRE movement, which helps them achieve financial independence at a young age.

What does financial freedom mean?

Many people believe that someone who is financially independent (FI) has inherited money, won the lottery, or received some other form of financial unpredictability. But that doesn’t always happen.

In general, financial freedom means having enough money to meet your needs without working for the rest of your life. This FI phase is sometimes disputed. However, there is no doubt that this should be a long-term objective for all.

Financial independence, or FI, for some may be in their late twenties or thirties. Others, on the other hand, may never achieve financial independence before reaching retirement age or are forced to retire for other reasons.

FIRE stands for “Financial Freedom Early Retirement.” Followers of this movement have only two simple rules – save as much as you can and live a frugal lifestyle. This is not a get rich quick strategy, but they hope to achieve financial independence early and retire early by following these two concepts.

It may be difficult for you to retire immediately, but you can achieve financial independence with smart investment strategies.

Let’s take a look at some investment strategies to help you reach financial independence faster while setting yourself up for retirement.

1. Investing in Dividend Shares

Investing in dividend stocks is growth investing, where you generate tax-efficient dividends paid regularly — usually quarterly or annually — and can be reinvested in your portfolio. It’s best to look for a stock that increases its dividend annually. The goal is to build a diversified investment portfolio that generates a tax-efficient income stream with annual growth.

Investing in Dividend Stocks

2. Investing in Index-Based ETFs

Index-based ETFs are exchange-traded funds that try to closely replicate and track benchmark indices such as the S&P 500. You can buy an index ETF at any time of day on the major exchanges, and in a single transaction, investors get exposure to multiple securities. Index-based ETFs have become popular as investors get low-cost access to diversified strategies.

Make yourself a successful trader or investor by enrolling in online trading courses like forex trading courses, day trading courses and etc. It is a smart idea to spend some time and effort first to gather invaluable insights from the best forex trading courses available before getting involved more. In the market where you can find the best forex mentor for you.

Investing in Index-Based ETFs

3. Investing in REITs

Real estate investment trusts (REITs) are alternatives to physically owning property. If you want to invest in property but don’t want to maintain the property, you invest your money in the real estate stock market instead. REITs own and operate real estate, allowing people to invest in their properties and providing investors with monthly dividend-based income. REITs purchase and manage many real estates, such as retail centers, apartment blocks, etc. REITs will collect rental income and distribute the remaining income to their unitholders after paying their expenses.

You can sell multiple shares with a REIT, whereas you cannot sell a house piecemeal. REITs provide investors with diversification by investing in multiple properties, so when one property suffers financially it will not affect your investment.

investing in REITs

4. Investing Through Robo-Advisor

Robo-advisors are an innovative way to invest, as they automatically invest your money for you. They are only available online and charge minimal fees. You can set your goals online, and the robo-advisor will give you an investment strategy that will align with your goals. Any time your life situation changes, you can adjust your goals and how you invest. It’s simple and easy, and available to anyone.

Investing through a Robo-advisor

5. Investing in Real Estate

If you are looking for a safe and risk-free way to increase your net worth, consider investing in real estate. Real estate investing allows you to diversify your portfolio by investing in properties that multiply in value while increasing your income through rental income.

investing in real estate

How do you know when you have reached financial freedom?

Because of its vague definition, the concept of “financial freedom” is equally difficult to understand. By the most accepted definition, you are considered financially independent when you save about 25 times your annual expenses.

The definition of financial freedom will change as the FIRE movement grows. Everyone’s financial situation is different, and I think everyone who desires financial independence should have their own definition of knowing when they have reached it.

The traditional math behind FIRE has some limitations.

Two rules of thumb are used in the traditional notion of financial freedom.

  1. The 25 times rule states that if you save 25 times your annual living expenses, you will be able to retire safely.

  2. Then the 4 percent guideline is used to calculate how much of your retirement savings you can live on each year.

According to the 25 times rule, if your annual living expenses are $50,000, you’ll need at least $1,250,000 ($50,000 X 25) to retire. If you follow the 4% guideline, you can withdraw up to $50,000 ($1,250,000 X 4%) each year and pay your living expenses in your first year of retirement. Inflation increases the amount you withdraw in subsequent years.

Financial freedom looks different for everyone

Wealth management is called “personal finance” for a reason. The individual circumstances of your financial situation define what makes a good financial decision. Overspending has far more dire consequences for someone who is in massive debt than someone who has $100,000 in the bank.

There is another specific issue to consider for our purposes. If you want to retire in your 40s, you’ll have to make very different financial decisions than someone who retires at 65. When defining what it means to be “financially independent,” it is important to base your definition on your specific financial situation and objective.

Conclusion

By investing early, you can achieve financial freedom faster. Expand your investments to diversify your portfolio, look for stocks that pay you dividends, and use online brokers to help you choose your investments based on your goals.

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Author: DLM Editor

Life Tips and Hacks for Life Happiness and Prosperity.