Let’s look at what you need to learn to have a comfortable retirement. I’m going to explain retirement investing in three different levels. Each level increases your opportunity to make more money, but your commitment will also have to grow exponentially. And remember that starting early gives you an incredible head start. Don’t wait another year—just start. Future you will be grateful.

Super Simple Method No. 1

You start saving a fixed amount every month—try 10%, and you will be surprised at how much it will turn into. The money gets taken out of your account and automatically invested in a very cheap “All World” index fund. When you retire, you will have the average of what every other investor in the world got, if not more, because of the low fees in the fund you picked.

Pros:

Takes no time. All you have to do is increase the amount you invest every time you get a raise. You will get a nice return. If the future is anything like the past, you will earn around 7-8% per year—or doubling your investment every ten years.

Cons:

For many, it’s not easy to live on 10% less than they currently live on. Start smaller and increase the amount when you get a raise. You must understand that this investing account is for your retirement only. If you want something else, save that money separately.

Why It Works

Investing in a single company is riskier than investing in ten, right? Well, when you invest in an index fund that covers the entire world, you are investing in thousands of companies. Some will thrive, others will fail, but there is no future I can see where all of those thousands of companies have gone bankrupt and you are left with nothing. A broad index fund is probably the safest thing you can invest in.

Simple Method No. 2

There is a fantastic loophole to making more money. It’s so simple it often gets scoffed at for being an old adage. I’m sure you have heard it before: “Buy low, sell high.” It’s great advice, but surprisingly hard to do because if it were easy to know when something is cheap, then everyone would be making money in the stock market.

What you need to do is save regularly in at least two broad index funds—for example one large-cap and one small-cap—and once a year, rebalance your portfolio to maintain your target allocation.

Example of rebalancing in action:

Let’s say you invest in two broad index funds:

• Large-Cap Index Fund: 50% of your portfolio

• Small-Cap Index Fund: 50% of your portfolio

After a year, large caps have outperformed, and your allocation has shifted to 56% large caps and 44% small caps. To rebalance, you sell some of the large-cap fund and use that money to buy more of the small-cap fund, bringing your allocation back to 50/50.

This strategy forces you to sell high and buy low, ensuring you don’t become overweight in one area of the market. Over time, this disciplined approach can improve returns and reduce risk, helping you stay on track for long-term growth.

Pros:

It’s so simple.Still manages to keep you in the loop. I love that it gives you a sense of ownership of the process.

Cons:

You will have to sit down once a year to figure out how much of each fund should be sold, wait a day or two for the money to show up in your account, then buy the funds that have underperformed.

3rd Option - Only for Enthusiasts!

Let’s just start by saying that even among those who do this full-time, most of them do NOT beat the average.

Wait, what?!

Yes! Most professionals cannot beat the average, so don’t think spending more time will automatically make you more money. Why is that? Let me break it down.

Full-time investors have to pay their own salary on top of generating market-average returns. That means that if the average return happens to be 10% and you are investing £1,000,000 of your own money and need £50,000 to replace your income, then you need to be making 15% on your money. You need to consistently make market returns plus 2-5% for the risk, and another 5% to pay yourself—meaning you need 17-20% per year, or double the market return. The biggest and best investment firms struggle to even outperform their own index after fees. Most funds disappear within 5-10 years because their returns after fees are actually lower than the market return.

If you want to try making money this way, be confident in your skills and don’t start with all of your savings. Let the majority of your savings stay invested in broad index funds and gradually increase how much you manage yourself. It will take more than ten years before you know if you have any skills or not.

Start slow and only invest your own money under three circumstances:

1. You are extremely confident in your ability to invest.

2. You are young and have many years ahead to learn and save.

3. You don’t mind losing what you have invested.

Pros:

1. You might enjoy learning how to invest!

2. If you enjoy thinking—a lot—on a single topic, this is for you!

3. Investing can be a bit like detective work. Figuring out what will happen in the future, what will stay the same, how can you benefit? If you like solving puzzles, you might enjoy investing.

Cons:

1. Thinking you are a great investor from the start might cost you. Stay humble.

2. It will take a long time to become good, and even then, your returns might not be what you hoped.

3. You will have to learn how much to risk on each stock.

4. It can get complicated when faced with the dilemma of selling and paying taxes to buy something else or keeping a stock.

Why It Works

If you are a great investor or if you give yourself time to learn, you will make money. But it’s more than just learning how to find great companies at great prices. Becoming an investor is not a quick skill you can pick up over a weekend. Unfortunately, it will take time—but if you like it, you should give it a try. If you stick with it, you will be richly rewarded.