Forget about Bitcoin. This is how I would invest in stocks to get rich

Today I will talk about how to invest in stocks.

This might seem strange, given that the SP500 did not fully recover from the COVID crash, while Bitcoin have risen by nearly 30%.

Nevertheless, I am confident that if you want to get rich by investing, the stock market offers far bigger long-term opportunities than Bitcoin.

Despite the market crash and all the economic uncertainties my investment plan has been the same for several years. Continue reading to find out why.

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To make money you need to be money smart

Before we begin, there is one thing that is critical for your success. You might think that a large paycheck is needed to get rich, but that is not the case.

The key to get rich is to be smart about money and to understand that the decisions you take today will shape your future.

Just a few months back I did not know these simple things, and everything was much harder for me. Remember, to make money, you need to be money smart.

What’s wrong with Bitcoin?

As you probably know already, Bitcoin was originally invented as a currency. It was born as an underground alternative to paper cash.

Nevertheless, hardly anyone actually uses it as a currency. Most people who own Bitcoin only have it in the hope that the Bitcoin price will rise.

It is true that whoever bought Bitcoin some years back made some huge profits. That time is gone, I don’t think this is a good time to buy Bitcoin.

Why I buy shares

On the other hand, falling share prices mean that I believe it’s a good time to invest in stocks. The economy will eventually recover, and you will profit from it.

Owning shares of a company is like owning a slice of a real business. Your shares are much more than just a symbol in the screen.

When you invest in profitable, successful companies, this means that the value of your shares is corresponds to real profits and cash dividends.

The benefits of owning company shares

Unlike Bitcoin, shares do have an intrinsic value — the value of the business you are buying a share of. Good businesses grow over time.

Companies create new products and invest in new technologies. They bring value to society by their products and services, by generating jobs and paying taxes.

All of these factors will reflect in rising share prices and larger dividends in your pockets.

How to invest in the stock market

Getting started in the stock market is easier than you might think. You do not need a major in rocket science to invest in the stock market.

It does not matter where you live, if you want to make money in the stock market you need to trade stocks in United States. That´s where the money is.

You can open a free trading account from anywhere in the world using a big bank like Charles Schwab.

The cheapest way to diversify

The simplest way to start buying stocks is to just put cash into a cheap diversified exchange traded fund, such as a FTSE All World Stocks.

This way you will have exposure to over 3.200 different companies, from all over the world, spread across the most varied market segments.

The way I approach building a stock portfolio is to buy a low cost global stock ETF gradually, investing a fixed amount of cash each month.

The secret of dollar cost averaging

By investing regularly, I can profit from periods when prices are low. This technique is called dollar cost averaging.

Investing regularly also helps me to avoid the risk of putting all my cash into the market just before a crash.

I personally like products from Vanguard, their All World ETF is traded in the main exchanges around the world at super low cost.

Using compound interest to get rich

Interest compounding is the beating heart of investing, it is the enabler to build wealth in the long run.

It is the critical tool of anyone joining the world of personal finances. You can get rich or poor because of it.

Compound interest is what makes an investment of $200 a month at 5% a year to become $82.000 in 20 years. That is $48.000 of investment and $34.000 of interest! Turn this 20 years into 30, and you have $160,000.

Dividens, where are my dividends?

When companies make profit they usually re-invest a part of it to ensure business keeps growing. The rest is normally used to reward its share holders.

ETFs are usually offered in two flavors. Distributing ETFs will deposit the dividends in your account while Accumulating ETFs will reinvest them.

I personally prefer to have accumulating ETFs as more money gets periodically invested. Compound interest takes care of making sure my money continue working for me.

Key Takeaways – WHY you should invest in stocks:

The key to get rich is understand that the decisions you take today will shape your future. To make money, you need to be money smart.

Most people who own Bitcoin only have it in the hope that the Bitcoin price will rise.

On the other hand, investing in profitable, successful companies, means that the value of your shares is corresponds to real profits and cash dividends.

Key Takeaways – HOW you should invest in stocks:

The simplest way to start buying stocks is to just put cash into a cheap diversified exchange traded fund, such as a FTSE All World Stocks.

By investing regularly you avoid the volatility risks of stocks. Discipline is key for a sound investment strategy.

This is how I invest in stocks. It’s not sexy and exciting like Bitcoin, but I’m pretty certain it’s a reliable way to get rich.