When I was 19, I lost money trying to get rich quick from investing in penny stocks and mutual funds.  It happened because I didn’t understand how the stock market worked.  I would watch BNN and subscribe to private newsletters with the next hottest stocks.  I would rely on this information to buy stocks and mutual funds.  I ended up losing more money than I made.  No matter how certain you or any investment professional are that a stock or mutual fund will go up, remember there is no guarantee and losses are always possible.

I knew there had to be a better and safer way for me to earn investment returns.

I learned early on that Amanda and I could actually earn higher investment returns from saving money on recurring purchases than with any investment product at a bank which often came with some form of risk, high fees and/or low returns.  Whatever we saved from buying recurring items on sale as opposed to at full prices would be a guaranteed return and ours to keep.

Guaranteed Investing

We used to buy a 12 pack of Activia yogurt every week for $6.00.  It was our go to snack at work or school. We didn’t enjoy the taste of other brands.  It took a while before we realized how much we could save from buying it on sale at $4.50 per pack instead of $6.00 per pack.  We would still eat the same amount of yogurt, however, we saved $78 a year ($1.50 per pack x 52 weeks in a year) by simply buying it at sale prices.  This is not hard to do when there was almost always a sale every week by a different grocery chain.  It was also very easy for us because we often shopped at grocery chains that price match the lower price of competing grocery chains.

We started applying this concept to everything else we usually bought – hair products, food, clothes, etc.  We still bought the same things and maintained the same lifestyle.  The only difference was that we were strategic about how, when and where we made these purchases.  I estimate we each saved approximately $1,000 a year from doing this.

In a time when interest rates are extremely low, it is impossible to earn much from putting money into a savings account.  Our bank was paying 0.8% interest rate for any deposits and we no longer wanted to take any risk with investing in mutual funds or stocks.  Our options were pretty limited in terms of looking at how we could stretch our dollars further.

For each of us to earn the equivalent of $1,000 in interest with this savings account, we would each need to deposit $125,000 into a savings account ($125,000 x 0.08%) for the whole year – something we each didn’t have.

I share this story for new investors because I wish someone told me this before I lost money from investing in penny stocks and mutual funds.  Before you decide to invest in stocks or mutual funds, start with finding out how you can save on recurring purchases because it’s the only thing that provides guaranteed investment returns with no risk.  Your money will thank you.