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The Get Rich Slowly investment philosophy and strategy

Author: J.D. Roth / Source: getrichslowly.org

As you spend less and earn more, you’ll begin to earn a profit and save more money. Maybe at first you’ll have a few dollars per month in surplus. Eventually, however, you’ll find that you’re saving 10%, 20%, or even 50% of your everything you earn.

The average person spends his surplus on whatever wants come to mind.

Instead of using the money to get ahead, he stays in the same place. Or, worse, he falls behind by taking on debt. A smart money manager puts her profit to use by investing for the future.

At first, you’ll pursue short-term goals.

If you’re in debt, get out of debt. Destroying high-interest debt offers the best possible return for your money.
Build a cash reserve. It’s smart to have money in a savings account to cover short-term emergencies.
Invest in yourself. Remember: the more you learn, the more you earn. Increase your skills and education. Update your wardrobe and improve your health. Become a better you.
Pursue your personal mission: fund college funds for the kids, pay off the mortgage, start a business, spend a year in southeast Asia. Use money as a tool to improve your life.

After your near-term wants and needs are satisfied, it’s time to look farther into the future, toward retirement and Financial Independence. You know what that means, right? It’s time to invest in the stock market!

Investing doesn’t have to be difficult. If you keep things simple, you can invest yourself and receive reasonable returns — all with a minimum of work and worry.

First, lets look at what not to do.

The Worst Investor I’ve Ever Known

Allow me to introduce you to the worst investor I’ve ever known. His name is J.D. Roth:

That’s right, I’m using myself as an example of what not to do when investing.

You see, for a long time I didn’t understand how the stock market worked. I treated it as if it were a casino. I picked a stock, put all my money into it, and crossed my fingers. I took risky gambles hoping to strike it rich.

Unsurprisingly, I lost a ton of money.

During the late 1990s, I formed an investment club with some close friends. Each month, we contributed money and picked where to put it. We chose stupid, stupid stocks — whatever was riding high at the moment. When the tech bubble burst, so did our bankroll and our enthusiasm.
In 2000, enamored by PalmPilot, I bought stock in the company that made the devices. I paid close to $90 per share. Just over a year later, the stock had lost 90% of its value. Oops.
One of my friends worked for The Sharper Image. In 2007, the company was struggling and the stock was in the toilet. At dinner one night, my friend told me how management was trying to turn things around. Sounded promising, so I put my $3500 Roth IRA contribution into the company’s stock. The company soon went bankrupt and my 2007 IRA contribution is now worth nothing.
During the banking crisis, I invested in Countrywide Financial. “Countrywide is on your side,” right? Wrong. Yet another stock that went to zero.

Look, I was dumb, and I know it. Unfortunately, my story is far from unique.

My father bought gold at over $500 per ounce only to watch it fall to $300 during the 1980s. More recently, I have friends who’ve bought Bitcoins for $700. And readers often tell me about how they’ve lost by speculating in the stock market like I did.

In the past decade, I’ve mended my ways. I no longer treat the stock market like a casino game. Today, I take a different approach, the same strategy recommended by Warren Buffett and lots of other smart folks.

Before I share this strategy, however, let’s talk a bit about philosophy.