Vanilla is usually what people call a “boring” flavor for ice cream. And by boring, they mean unadventurous or dull. Basically, “boring” has a negative connotation in our society. When it comes to investing and the stock market, there is that saying, “The higher the risk you take, the higher the return.” But being a “vanilla”, or boring, investor is not always a bad thing. In fact, it can make you rich!
Surprised? You shouldn’t be! To be honest, most millionaires out there actually fall into this “vanilla investors” category. But what does it really mean to be a “vanilla investor”?
First of all, leaning towards plain and simple investments are always better than taking on the complicated and risky investments. Vanilla investor millionaires are very risk-averse and passive when it comes to managing their investments. Why is that? Compared to those aggressively managed blue-chip funds, the returns of these low-cost and stable ETFs or index funds usually grow faster since they have a higher rate of return and are low in cost. So in the long-run, the results of these “boring” stocks will prove to give you a higher gain with little to no maintenance!
However, it is so tempting to stop yourself from chasing after those trendy investments, especially with all of the tech start-ups popping up everywhere. But an important mindset to have is that when investing, you need to focus on risk, reputation, diversification of your assets, and tax rates. Being risk-averse and boring actually serves as a protection barrier from investing in the wrong company.
Don’t think that being cautious is a sign of fear. No! Being conscious of the risks is really a way for you to thoroughly understand the actual value of the investment. And when it comes to stocks, millionaires care the most about valuations! So next time, if a stock is priced at an unrealistic number, don’t feel obligated to buy it unless you feel that it is truly worth that value. Additionally, be aware of the tax rates because they are a significant factor that will cause you to lose your investment earnings.
And that, is how you think like a millionaire “vanilla investor” and strike it rich. You really don’t need to pick the risky roads in order to get to the same destination. So don’t be afraid to be a little “vanilla” sometimes!
Written by Lake Avenue Financial