Is This ‘Boring’ Strategy the Best Way to Build Wealth? Here’s What We Think

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Following this strategy could be all you need to do to end up rich. 

Building wealth is a goal everyone should have. This doesn’t necessarily mean you need to aim to be rich — but you want enough money to provide you with financial freedom, security, and the ability to retire without worry.

There are lots of different strategies for building wealth, some of which (like investing in cryptocurrency) can be much riskier than others. But the good news is, you don’t need to embrace complicated investments or spend endless hours managing your brokerage account if you want to become wealthy.

There’s a simple, boring wealth-building strategy that’s pretty much a sure thing and that just about anyone can adopt.

This wealth-building strategy is effortless and it’s all you need

Personal finance expert and YouTube personality Graham Stephan outlined the simple wealth-building approach that anyone can try out.

“The best way to create long term wealth is to Dollar Cost Average into an Index fund,” Stephan said. “It’s boring but you’ll beat almost everyone who tries something else.”

So, what exactly does this involve? Simple.

An index fund is an investment designed to track the performance of a financial index. For example, there are S&P 500 index funds. When you invest in one, your money is pooled with the funds of many other investors. The entire big pot of money is used to buy stock shares of the approximately 500 companies that make up the S&P 500 (a stock market index that tracks the performance of around 500 large U.S. companies).

If you buy an index fund, a little tiny bit of your money is invested in every company that is included in the index. If most of those companies perform well, your money will go up in value. With the S&P 500, there’s a long track record of the index doing very well. In fact, it has earned a 10% average annual return over the long term for decades.

Stephan specifically recommends dollar-cost averaging into an index fund. This is an investing strategy where you spend a set amount of money to buy shares of the index fund over time. For example, you could buy $1,000 worth of an S&P 500 index fund on the first of every month.

The benefit of dollar-cost averaging is that you don’t have to try to time the market, and you inevitably buy more shares at a lower price. If you always spend $1,000 and the price of the fund is $100 one month and $90 the next, obviously you buy more shares when you’re paying $90 each for them.

Why is this such an effective wealth-building strategy?

This strategy is extremely effective at helping you build wealth because index funds have a consistent track record over time. Plus, since you’re investing in so many companies, you’re minimizing your risk of any one company significantly underperforming or going bankrupt and sinking your portfolio. And by dollar-cost averaging, you’re buying regularly so you don’t have to worry about timing the market.

This approach is much safer and simpler than buying shares of individual stocks or other investments like crypto, and it’s one many people would benefit from embracing.

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