My main broker that I use is trading 212, I use this app because of the innovation and commission free trading.
One of the latest features they have introduced on the app is called ‘pie’ investing. What this feature does is, it allows the user to create their own investment ‘pie’ which is a collection of companies you wish to invest in and what % of your funds gets allocated for each company.
This is a phenomenal idea and although it isn’t a completely new concept, it works extremely effectively with a broker that provides commission free trading. The maths behind this is: select a handful of companies that are low risk and preferably pay dividends (ETF’s are a great choice as well) and use a sensible allocation to each company will also ensuring that you’ll get at least an 8% return on the overall ‘pie’. The next step is to use the auto-invest feature on the ‘pie’ to invest a fixed amount monthly into the pie. Doing this for a prolonged period of time lets say 40 years will guarantee you to become a millionaire. This is compounding. It get’s better as well if you set the ‘pie’ to reinvest dividends. For example, if you set up a ‘pie’ that returns 10% a year and you initially invest only £100, but you contribute £200 a month for 40 years. At the end of 40 years you will have £1,123,447 (and that isn’t including any reinvested dividends).
My ‘pie’ has a mixture of 4 companies and ETF’s: Realty income (O), iShares S&P 500 ETF (IUSA), iShares FTSE 250 ETF (MIDD) and finally Tri-Tax Big Box REIT (BBOX). All these equities pay dividends, Realty Income pays them monthly which will greatly help the compounding effects.
It really is as simple as that. This is how Warren Buffet made all of his money. He said that compound interest is the seventh wonder of the world. However, not many people do this because they say it takes too long. No one wants to get rich slowly but that’s the smartest way to do it.
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