When you want to start investing your first dollar, just jump in! It’s the same as when you want to jump in the pool. It might be useful to dip a toe first, but chances are you don’t want to go in at all after that, so why not jump in immediately?
I understand that investing your money might be stressful, scary, and a lot to take in at first. With this post, I hope to make it easier for you. I will break it down in bite-sized pieces and list beginner investing tips.
I want you to start investing so that you can master your money and reach your financial goals. You might want to invest so you can:
Did you read the book Rich Dad Poor Dad? The most important lesson from that book is: don’t work for money, let money work for you. That’s exactly what you’re doing when you’re investing your money in the stock market.
Why Is It Important To Let Money Work For You?
I can imagine that this question would pop up in your head. It’s important because $500 today will not be worth $500 in the future.
If you’re not investing your money, $500 today will be worth less at this time next year – thanks inflation.
If you’re investing your money, $500 today will be worth more at this time next year. When you invest, you let money work for you and hopefully earn you income.
If you put $5,000 away today in an investment account and you don’t touch it for 30 years, how much do you think it will be worth? With a historical average return of 7% on the stock market, your money will be worth $38,061. If you put $5,000 away every year for 30 years, it will turn into $543,427. That’s a lot of money!
5 Simple Steps To Start Investing Your First Dollar
1. Save Some Money
One of the most important things to do to start investing your first dollar, is to save some money to get started. If you’re not sure how to do it, I recommend paying yourself first. That way you can save some money for your financial goals. Whether that goal is investing, saving for a specific goal, or building your emergency fund.
Through the method of paying yourself first, you can make sure that every month a specific amount of money is reserved for that goal. Try to maximize this, so that you can invest an optimal amount of money into the stock market.
The best time to start investing was yesterday, the second best time is today!
If you’re just starting out, I would recommend saving just as much money as you can. Maybe that’s $100 per month, maybe that’s $25 per month. It’s all fine.
If you’re from the US, you may want to look into Acorns. Acorns is an app that rounds up the purchases you do with your credit card or debit card and invests that money for you. Acorns automatically invests for you, which is amazing! You can set up the app in under five minutes.
2. Do Your Own Research
This part is very important! Do your research when investing. Don’t think: Google had a +20% return over the past year, that means I should buy it. Or: I like my MacBook, I think I should invest in Apple, they make products I like.
Before you start putting your money towards the stock market, know what you’re putting your money towards.
Read about investment-related content if you want to know how to start investing your first dollar. You can start by checking out:
- Dividends Are Just Like Nachos – Dividend Investing 101
- Why Low-Cost Index Funds Are Amazing – Index Funds 101
3. Open An Investment Account
When you’re ready to open your investment account, choose your strategy wisely. The best you can do in my opinion is open an account with an online broker. You can also find someone to manage your investments for you, but their fees are mostly way higher.
There are a lot of brokers you can choose from, my favorites are:
- Vanguard – They are my absolute favorite!
- DEGIRO – A low-cost European broker that I’m personally using. Read my full DEGIRO Review here.
- M1Finance – A US robo-advisor/broker with no trading fees, no account fees, and you can start investing with any amount!
4. What Do You Want To Invest In
How much stock or bond allocation you take is up to you, depending on how much risk you want to take. Do you want to go for higher risk? Focus more on stocks. Do you want to go for a lower risk? Focus more on bonds.
Most of the time the rule is: the sooner you need your money, the less risk you want to take. If you invest over a longer period of time, the ups and downs of the stock market will more likely be evened out.
Investing in individual stocks or bonds is not the easiest, because it’s hard to know what exactly is a good investment and what’s not. That’s why I personally invest in ETFs. ETFs are Exchange Traded Funds, which means that you can buy a group of stocks in any specific area. You can ETFs for oil, gold, S&P 500, or even the entire world!
What I’m doing, is investing in an ETF that focuses on the entire world, so that you have over 5000 companies in one single stock. How amazing is that?
5. Check-In Once Per Month
Yes, you have invested your money, well done!
Now it’s time to check what you have invested in. I would recommend not checking it too often, but once every month would be recommended. If you want to change your portfolio, put more money in it, or plan to withdraw money, you might want to check it a little more often.
After you’re done with that, you can repeat the cycle. Honestly, the most important thing is to just start! As soon as you dive in, you will get familiar with the process and it will get easier.
Have you started investing yet? Why or why not?