INVESTING 101
When it comes to finances, making money is the easy part but knowing where to invest is when it can get tricky. We’ve all heard the stories about the stock market and how unpredictable it can be. However, I am also sure you’ve about the billionaire Warren Buffet making the majority of his fortune off of his stock portfolio. So at the end of the day what it comes down to when your investing is risk tolerance and strategy.
How To Get It Done!
Stocks are a long term investment because the market fluctuates frequently. Never invest money in the stock market that you know you’ll need soon. My recommended timeline for an investment in the stock market is about 7-10 years. Anything shorter than that I would suggest finding another alternative because there’s nothing worst to watch than the market drop after putting your savings into it! Typically this is how new investors get burned because they see their portfolio tank and then pull out before the market recovers and never end up recouping their money. Please don’t be that guy.
Another suggestion is investing in mutual funds or ETF’s instead of individual stocks. My reason for this is diversification. Diversification will keep you from having all of your eggs in one basket. Imagine having all of your money in ONE company and the CEO does something outrageous or media finds out there are a scandal and company stock tanks over 50% Guess who just lost 50% of their portfolio …haha YOU. Scary right?
This is why I rarely ever invest in individual companies I use Mutual Funds or ETF’s they give me a piece of mind. If one company in the stock fund goes bankrupt, I still have over 400 other companies making me money. Another benefit of investing in stock funds is you can own multiple companies at once! I have in ownership Apple, Microsoft, AMAZON and many others with one single purchase. Today one share of Amazon is $1600 for most people it would take forever to save up to purchase one share but not with an ETF. The first ETF I ever purchased was #SCHX and my second one was #QQQ. It has been about four years since I initially invested in these two funds and they have grown my portfolio tremendously. I’ve stayed in the marked from it’s lowest lows up until the highest peaks. The good thing about the stock market is even when it crashes it ALWAYS recovers. Now that you know what I invest in I would like to show you how to pick your stock funds.
(A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual fund are known as its portfolio. Investors buy shares in mutual funds. An ETF, or exchange-traded fund, is a marketable security that tracks a stock index, a commodity, bonds, or a basket of assets. Although similar in many ways, ETFs differ from mutual funds because shares trade like common stock on an exchange.)
Tips To Investing In Your First Stock
- Find the right bank/broker – ( I use Charles Schwab/ I also like robin-hood )
- Purchase the Investing Bible (This book taught me everything I know!)
- Use investopedia to learn the terminology
- Check out the rating of the stock on morning star and make sure it’s low risk
- Try to start off investing in INDEX FUNDS. They are lower risk and tend to perform better.
- Download a stock screener and learn how to use it
- Download seeking alpha or marketwatch and put your stocks on a watchlist and read a headline about them everyday !
- Never make a decision based off emotion !
- Never invest what you cant afford to lose!
- When choosing a stock fund it’s important to look at how it has performed over the last 10 years! We want to look at funds that have either beat or matched the S&P 500. Ideally you want to grow your money by at-least 10% a year
- Only invest in funds with an expense ratio less than .30 (How much the fund manager charges to invest your money) Point anything seems low until you realize how much money you will pay out over the next ten years!
- Only invest in Funds with NO or LOW fees (Non Load Funds Only) (A load fund is a mutual fund that comes with a sales charge or commission. The fund investor pays the load, which goes to compensate a sales intermediary, such as a broker, financial planner or investment advisor, for his time and expertise in selecting an appropriate fund for the investor.)
It’s Time For Some Action….
Now that you have the basic foundation of what it takes to start investing its time to get started! When it comes to building wealth, it is a prolonged process, and there aren’t any shortcuts. There’s no easy way to build wealth, and this applies to everything from stocks to real estate so keep in mind that to win in this game consistency is key. Imagine finding apple back in the 90s or early Microsoft man we would be we rich! Only invest in companies that have products you like or a vision that you believe in. Also, keeping up with the headlines of companies you invest in will make paying attention to your portfolio more enjoyable and keep you accountable. It’s essential only to make decisions based on research, not the media. Chances are if a stock is all over the mainstream it’s usually too late to invest, and that’s just being brutally honest. The goal when investing is to find the hidden gems and grow with the companies over time.
Now get out there and make me proud ! – JC
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