Passively generating money is the dream of many but accomplished by the few. The reason behind this is that it normally takes time, energy, and a bit of luck to get there. However investing in the stock market is easy and by doing so you will generate easy cash.
The top 3 ways to invest in the stock market with zero knowledge are the following.
- Buy large index tracking ETFs
- Buy and hold bonds
- Invest and hold dividend generating stocks
Each of the above investments will generate you passive revenue and has little inherent risk. The best part is that you can either reinvest this excess cash and start what is called an investment snowball.
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Without further ado, let’s jump into the top 3 ways to invest in the stock market with zero knowledge.
Easy Way to Invest 1: Buying Large Index Tracking ETFs
This is by far the easiest way to invest in the stock market and maximize your return. Investing in large index tracking ETFs will net you around 10% per year in the United States. The largest of these ETFs currently is the SPY.
The SPY tracks the top 500 companies in the United States by market cap and then spreads out their investors’ money across those top 500 companies. What this means for you as an investor is that if you buy one share of SPY you are actually buying 500 smaller investments in the most successful companies.
These 500 companies include large names such as Google, Amazon, Facebook, Tesla, and many others. As a result you can expect your investment to grow by about 10% per year every year.
However there are many other large index tracking ETFs that you can invest in depending on what you like. Here is a list.
- VTI: tracks the top 500 companies like the SPY but less risk
- IVV: Same thing as the SPY
- QQQ: Instead of the top 500 companies this ETF is comprised of the top 100 companies in the U.S
- VUG: The Vanguard Growth ETF, invest here if you expect innovation to propel the market.
- VT: This ETF invests in the entire world, less return but also much less risk for your investment.
Each of the above ETFs are a good choice. You will see capital appreciation over time and they require very little research time to decide which one to invest in. I know plenty of people who treat these ETFs as glorified savings accounts and simply let their money grow.
It is low hanging fruit for those who are not already investing in ETFs.
Easy Way to Invest 2: Buying and Holding Bonds
Bonds are an amazing way to generate excess money, so long as you are willing to lock up some of your excess capital for 5,10,20 years. Essentially a bond is a loan that you give to an entity (person, corporation, or government) and in turn are paid out a set percentage of interest over the lifetime of the bond.
Bonds require little education or knowledge to invest in. You are essentially guaranteed to get excess cash from the bond payouts over time. This guaranteed payout comes with a significantly smaller ROI when compared to ETFs.
The best thing about bonds is the fact that they carry little inherent risk. This is typically why you see older generations investing in bonds, they know that their money will be protected and that they will get a very small ROI on their capital.
If your interested in U.S treasury bonds I suggest checking out the U.S treasury bond website Tresurydirect.gov. Its a great way to ‘pad’ a portfolio against a downturn in the stock market and also maintain a return on investment.
Easy Way to Invest 3: Buying and Holding Dividend Generating Stocks
Dividends are payouts made by a publicly traded company to their shareholders. Essentially the company you are investing in will pay you just because you are a shareholder.
Sounds good right? Well that’s because it is. Dividends are an amazing way to easily grow a stock portfolio without you putting in any excess capital. You simply need to let good stocks continue to grow. Over time you will notice that your total dividend payout will increase as you accumulate more and more shares.
Some of the most successful investors in the world used dividend’s to snowball a portfolio. People like Warren Buffet used dividends and time to grow their net worth to astronomical heights. The good news is that you don’t have to be a rocket scientist to do the same thing.
Here is a graph demonstrating what I am talking about.
This is a theoretical dividend portfolio composed of the following monthly dividend paying ETFs with their dividend reinvested back into the stock.
- BIT: Multi-Sector Income Trust
- FOF: Cohen and Steers Fund of Funds
- KBWD: Invesco KBW High Dividend
As we can see over a 24 year span your total dividend portfolio grew from an initial $100,000 investment to almost $500,000 and also nets you around $34,000 per year in dividends. That’s easily doable by most people in the United States, and is a great nest egg.
However, if you let that dividend portfolio grow for another 6 years without touching it (30 years) then this is what happens.
Now instead of only having a portfolio worth just under $500,000 and paying out $35,000 worth of dividends you now have around $700,000 and get just under $50,000 worth of dividends. All that from just another 6 years of dividend snowballing.
If you want to be rich easily just let a dividend portfolio snowball out of control. Imagine you started doing this in your 20’s and lived to be 100. Now you understand how Warren Buffet is so rich.
There you have it, the top 3 ways to invest in the stock market with zero knowledge. It’s not hard to start generating passive income in the stock market, it just takes some time to let your investments grow.
As usual if you like content like this then feel free to subscribe to the free newsletter. I am here to help others generate wealth in the stock market so that they can achieve financial freedom.
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Until next time, I wish you the best of luck in your investment journey.