First and foremost if you don’t have a lot of money to invest, the best investment you can make is always going to be in yourself. You might buy a course to learn some new valuable skills or buy software that can help automate or improve some function in your in your business.
Anything you can invest into yourself that can provide a measurable impact to your earning potential or that of your business is what you should focus on first.
After ensuring that the businesses that I’m building have more than enough money to grow (and only then) do I take some of the surplus money and invest that into other various buckets.
Where I invest surplus money
I focus on a few specific areas:
#1 Invest in online businesses that I don’t manage
For example, one of my first full time team members decided to set out to start his own ecommerce business back in Dec 2015 after working with me for nearly 2 years. I invested a sizable chunk of cash into the business in exchange for some equity (less than 50%).
In this investment, his plan from the start that I wholeheartedly supported was to take very little money out of the business for personal expenses and instead to continue to reinvest as much of the cash back into the business to grow. This is an ecommerce business with sales predominantly on Amazon. 2016 sales were around $300k. 2017 should be over $1 million in sales.
#2 Acquire online businesses that I do manage
I’ve bought and sold a variety of different online businesses and websites. I am always looking for high quality websites, software products etc to acquire. Contact me if your website, software product etc is generating at least $5,000 a month in profit.
#3 Index funds
With any topic or for any skill it makes sense to take notes from the best in the world to influence your own strategy. When it comes to investing Warren Buffett is great to learn from and his annual shareholders newsletters are worth reading even if you don’t own shares in Berkshire Hathaway.
Warren and a hedge fund manager each contributed $500,000 to create a 10 year $1 million dollar bet of index funds vs hedge funds. The details of the bet can be found here which ends on Dec 31st, 2017 (spoiler: index funds are currently winning by a wide margin).
I currently invest into index funds every month and I use a company called Wealthfront to automate the allocation of where my money gets split.
Here’s my Wealthfront review if you’d like to learn more.
#4 Individual stocks
The bulk of the money I invest goes into index funds, but I do have a small portion of my portfolio in a handful of individual stocks (primarily dividend generating stocks for the cash flow).
#5 Real estate
I own my personal residence outright but I’m not actively looking for real estate investments at this time. The returns from investing or acquiring an online business exceed real estate and even though these investments can be risky I have years of experience with online businesses vs little experience in real estate. I will eventually get to real estate though.