Why You Should Start Investing Now
What is the secret of investing? In fact, it does not exist. Investing doesn’t take long and pays dividends ( literally ). We are often overwhelmed with article headlines that promise to tell us which five hot stocks are the keys to getting rich quick. Or we think of it as “only rich people know how to do”. Research shows that women in particular question their investment savvy, and for many, investing is a privilege. Most Americans don’t have a ton of money to throw around.
But there is no “secret” investment knowledge that you lack, and there are no fancy strategies you need to learn first. You just need to get started. As I wrote earlier:
To save effectively, you need to start small and do it consistently. You get into a habit and it will become easier to put it off over time. How long will it take until it becomes second nature? Of course, this will largely depend on you and your personal circumstances. Live within your means, automate your savings, don’t cut corners. Look, I’m bored just typing these words, but it works.
You can start with a few dollars and a few minutes of research. It’s easier than reading more, exercising, eating better, or accomplishing just about any of your goals right now.
Here’s how to do it.
Select an account
If you’re being offered a 401 (k) account at work, congratulations – you’re already on your way to investing. Otherwise, you will open an account (either another type of retirement account like Roth or a traditional IRA , or a taxable account , depending on your financial goals) with a brokerage company like Fidelity, Vanguard, or TD Ameritrade.
Online brokers let you manage your own investments, or you can choose a robo advisor like Wealthfront or Betterment to automatically make investment decisions for you. Chances are, you won’t need to pay extra to invest in robotics; the best strategies are simple enough that you can apply them yourself.
Don’t choose at random – not all brokers are created equal. A quick Google search for “best robo consultants” or “best online stock brokers” will help you quickly figure out the situation. You will want to choose the one that best suits your goals. Some things to consider are management fees (which should be well below one percent), minimum invoice amounts, and investment options.
Select your attachments
After opening an account, you will need to choose how you want to invest your money. Most online brokers have fairly low minimum rates – unless you are starting out with the big bucks, you should make sure this is the case with the company of your choice.
Your goal when investing is to match the market, not beat it (guess what: no one beats the market all the time), because historically the market has grown.
Yes, there will be failures. But overall, the market is growing , which means your investment will become more valuable over time. So, go for inexpensive mutual funds or index funds .
This is a collection of stocks, so you allocate some of the investment risk; you don’t want to invest all your money in one company. Chances are, if you stick to your 401 (k), you still don’t have access to individual stocks.
You want to pick a couple of them. And you want to decide how much of your money will be invested in stocks and how much in “safer” investments such as bonds or cash. Generally, the younger you are, the more inventory you should have, but ultimately it depends on your risk tolerance and your financial goals.
Some specific examples of which funds to choose can be found in this article:
Be consistent
You may have noticed that I continue to use the word “sequential”. This is because one of the keys to investing, besides time , is to keep going.
By consistently funding your retirement or taxable account, you will overcome market lows and accumulate wealth over time. “When setting up your account, select an automated trading plan if possible to benefit from the dollar value averaging,” writes Anna Louise-Jackson for Nerdwallet . “It’s a strategy for scattering investment purchases over time to ensure that you don’t invest all your money when prices are high.”
So, once you have opened your account and made an initial deposit, set up automatic contributions into it. Treat it like a bill to be paid on time. How often do you do this and how much is up to you; try to do this at least once a month, if not once a week.
Of course, you will want to check your attachments periodically. But until you make informed decisions ahead of time, your investment should be set for a while. In many cases, you don’t need a lot of money to get started.
This post was originally published in 2019 and was updated on June 23, 2020 by Lisa Rowan. Updates include the following: revised accuracy links, updated formatting to reflect the current style, revised title and feature image, revised article to combine some of the content.