In this era where money seems to diminish with each passing day, many people aspire to grow their wealth through investments, hoping to achieve financial freedom one day and break free from the shackles of corporate employment and fixed salaries.
If you’re interested in VOO and QQQ, and you’re currently investing in them, you might wonder: Can continuous investment in VOO and QQQ truly lead to financial freedom?
Therefore, I will share my own experiences to analyze whether investing in VOO and QQQ can indeed lead to financial freedom. Additionally, I’ll discuss the five conditions you need to meet in order to achieve financial freedom.
What is your definition of financial freedom via VOO and QQQ?
Although financial freedom is an important goal, everyone defines it differently. Your idea of financial freedom may not be the same as mine.
Therefore, you need to assign a meaning or goal to these four words, such as saving $100K, $1 million, or generating passive income from investments to cover your living expenses, and so on.
For example, my definition of financial freedom is to save at least $2 million before retirement.
If you haven’t thought about your financial freedom goal yet, you can follow my lead and set a somewhat challenging number, like accumulating $1 million over 20 years.
Can investing in VOO and QQQ really lead to financial freedom?
If you use a fixed amount as your financial freedom goal, then investing in VOO and QQQ can indeed help you achieve your desired outcome, as long as you fulfill the following conditions.
5 conditions you must achieve
To achieve the financial freedom goal mentioned earlier, there are 5 conditions that must be met:
Have the discipline to regularly invest
Firstly, you must have the discipline to regularly invest in VOO or QQQ.
You can adopt a strategy of buying at fixed intervals each month or each quarter, or you could opt for making large purchases once a year.
The key is consistency in purchasing VOO and QQQ. Trying to time the market to buy at the lowest point may cause you to miss out on valuable investment opportunities. Therefore, disciplined buying at fixed intervals, regardless of whether it’s at a high or low point, can still contribute positively to the growth of your assets.
Maintaining patience and holding onto your shares diligently
Next, after purchasing VOO and QQQ, please refrain from selling them indiscriminately.
Index-based ETFs like these require patience to allow time to cultivate profits, especially those with long-term upward trends. Despite experiencing fluctuations, these ETFs generally continue to rise over time, allowing profits to grow steadily.
Listening to various market opinions and selling these tools, which can potentially generate significant long-term wealth, for the sake of short-term gains, would not be advisable.
Therefore, maintaining patience and holding onto your shares diligently is the second condition you must fulfill.
Ensuring that you have funds to invest every month
Ensuring that you have funds to invest every month is the third condition you must fulfill.
Many people may say, “I don’t have enough money left after covering my expenses to invest in VOO and QQQ,” and this statement can be both true and false.
On one hand, some individuals may genuinely find themselves unable to invest due to family obligations or existing debts (such as mortgages or student loans), leaving them with no surplus funds for investment. In such cases, it is understandable why investing may not be feasible.
On the other hand, some people simply overspend on discretionary items, indulging in whatever they desire, whether it’s extravagant meals or unnecessary purchases, while consoling themselves with the notion that they are merely “transforming money into things they enjoy.” In reality, they could have surplus funds available for investment if they exercised more restraint.
Therefore, if you aim to have funds available for investment every month, you can explore suitable methods such as curbing impulsive spending or seeking additional sources of income to create more financial leeway for yourself.
Do your homework beforehand and maintain confidence
The fourth condition is that you must do your homework beforehand and maintain confidence.
Doing your homework here refers to researching the long-term trends of VOO and QQQ (see below), along with gathering relevant supporting data (such as GDP growth statistics). Additionally, you need to devise a plan outlining how many years you plan to invest, how much you intend to invest, and ultimately, the amount of money you aim to accumulate. These are all essential considerations that need to be addressed before investing.
Lastly, you must simulate scenarios to prepare for potential downturns, similar to the long and painful decline experienced in 2022 (see below pic from Yahoo!Finance). Determine whether you can endure such situations and devise strategies to maintain confidence and navigate through them. By rehearsing these scenarios in advance, you can prevent yourself from being swayed by market sentiments and avoid making erroneous judgments when faced with real challenges.
Increase your investment amount at regular intervals
The final and most crucial condition is whether you can increase your investment amount at regular intervals.
Relying solely on investing $100 in VOO and QQQ each month will not realistically lead you to financial freedom; it’s simply impractical. If you aim to accumulate over $1 million, or even more, you’ll need to invest at least $1000 per month. Of course, this figure may vary depending on when you start investing.
Therefore, the best approach is to take advantage of opportunities such as regular salary increases or moving to higher-paying jobs to increase your investment amount. Alternatively, distributing your annual bonuses and bonuses evenly across each month for investment purposes is also an excellent strategy (far better than squandering it on transient pleasures).
Conclusion
Everyone has a different definition of financial freedom, with the most common goal being to accumulate millions within a certain number of years. Achieving such ideals through investing in VOO and QQQ is entirely feasible.
To reach this goal, you must invest diligently, hold onto your shares, ensure consistent monthly investments, do your homework and maintain patience, and steadily increase your investment amount over time. By fulfilling these five conditions, you can truly rely on VOO and QQQ to achieve your goals.