Warren Buffett advises making money while you sleep: Here are 5 "Forever Assets"
Billionaire superinvestor Warren Buffett has shared a wealth of financial knowledge throughout his nearly 70-year career. When he retired, he said: “If you don't find a way to make money while you sleep, you will work until you die. »
Obviously that's true. Without enough passive income (or enough savings to “pay” yourself), you will never be able to retire. If you're worried that you're not on track to get there, you're certainly not alone. A Gallup poll earlier this year found that 71% of non-retired adults are at least moderately concerned about their ability to fund their retirement. In a GOBankingRates survey conducted earlier this year, about half of respondents also expressed concerns.
So how can you make money while you sleep? We asked experts for their top “hard assets” that will give you passive income and/or increase in value.
High yield savings account
Max Lane, CEO of Flourish said: “Amid uncertainty, one thing investors can be sure of is the opportunity to earn more interest through high-yield savings accounts ”. “Americans have lost at least $291 billion in interest since the beginning of 2019 when depositing savings at America's largest banks. Traditional savings accounts currently have an average APY of around 0.42%, while high-yield solutions offer 4.5% or more. This is a difference of several thousand dollars for many households.
Cash is king, but historically, holding on to cash long term has not been a good idea. In a low interest rate environment, inflation often outpaces your profits and your money loses value over time. “Most people don't see cash as an investment but as a source of protection and security,” says Lane. “But cash has become an asset. As many people feel their purchasing power dwindling, the question everyone should ask themselves is whether their money is currently working for them.
“There's no reason you shouldn't get more than 4.5% cash now, especially because high-yield accounts are protected by the FDIC (up to a certain amount) and because of daily liquidity .”
Real Estate
Real estate is a classic investment vehicle that can provide you with passive income while increasing in value. Dr. David Phelps, real estate expert and CEO of Freedom Founders, believes that real estate is the best asset class. “Real estate as a physical asset is what we call or describe as an ‘inefficient market,’ as opposed to the financial world, which is called a ‘market effective'. “This is a great advantage [allowing] individual investors to take advantage of real estate market inefficiencies to be able to access and invest in places that mainstream funds cannot reach. “It also offers a number of additional advantages over other asset classes, including tax advantages, depreciation, cash flow and the fact that it can provide additional leverage by being used as an asset. collateral to borrow, so you can invest in additional assets.”
Dividend stocks
One of the problems with real estate is that it has a relatively high barrier to entry. Even if you're financing a property purchase, investment properties often require a large down payment, which may be out of your reach, especially if you're just starting to invest. If this is you, dividend stocks could be a great choice. “Investing is the ultimate game of patience, and ‘fixed assets’ like dividend-paying stocks can really let you make money,” said Taylor Kovar, CFP and CEO of The Money Couple. while sleeping. “Companies like Procter & Gamble or Johnson & Johnson, with their decades-long history of paying dividends, are examples of such assets. With stable and growing dividends, they can provide a steady stream of passive income. Historically, these stocks have provided investors with solid returns, with both companies averaging annual returns of 10-12% over the past 30 years. If you're not sure where to start when looking for dividend stocks, consider the so-called "dividend aristocrats," a list of stocks that have increased their dividend every year for 25 years.
Broad market fund
Broad market funds, also called index funds, are investment vehicles that attempt to replicate the performance of the entire stock market or an index such as the S&P 500. Buffett has said that one of the best ways to Accumulating your retirement savings is “consistently buying a low-cost S&P 500 index fund. I think that's the thing that makes the most sense all the time. “You earn passive income from investments that appreciate and generate income over time,” says Rubina Hossain, contributor to CFP and Annuity.org. This income is then reinvested while you are not using it. The best value for money would be index mutual funds and ETFs. These funds provide diversification, meaning you don't put all your savings in one stock or even all stocks. They also offer investments in a mix of stocks and bonds in a fund and they are profitable. “Simplify and control what you can: investment costs and taxes (index funds tend to be more tax efficient). Over time, you will create a decent source of income.
Annuities
If you're nearing retirement, you can use your existing savings to create your own "permanent assets" through an annuity. An annuity is a financial product that provides payments over a period of time in exchange for an initial lump sum payment or periodic payments. “An annuity is a contract that can provide lifetime or forever payments to retirees,” said Evan Potash, wealth management advisor at TIAA. “These payments can be fixed payments or variable payments. Fixed payments are popular for people who don't want their income to fluctuate. Variable payments can fluctuate from year to year depending on the underlying investment such as the S&P 500. The goal is to fight inflation. A life annuity combined with Social Security can ensure that you never run out of money, making it a permanent asset strategy.
