When I was a senior in high school and just turned 18, I had around $7,000 in a savings account. I made great money and worked a lot of hours for a teenager, and didn’t spend a lot on much more than video games and gas.
I would always go deposit my paycheck in person at the local bank. They had caramel suckers that I took every time I went in. I also always saw the brochures for different products the bank offered, including IRAs. My dad always told me I needed to start one early, and he said that he would advise a ROTH.
I believe I picked up 10 of those ROTH IRA brochures, each one showing how to start an account, how to invest in it, and why it was a great investment account. I told my dad multiple times that I wanted to start one, and every time he told me to have the manager sit down with me and open one.
Knowing I wanted to major in finance in college, I had stock market knowledge. I even started researching account to open online, to buy stock in companies that I knew. Geared with this knowledge, I wanted to read more about stocks, so I bought The Intelligent Investor. Well, what happened after all this turned out to be a bit embarrassing now….
None of that money was ever invested in the stock market.
Sometimes I look back on what could have been and eventually realize none of that matters anymore. I have done well to start investing, pay off a lot of debt (more to go), and have a great life so far. Learning from this past mistake has led me to invest every month, whether in my 401(k) or other investment accounts.
Bankrate.com did a survey back in 2016 that said 54% of Americans don’t invest. People aged 18-35 are worse off. 66% of this age group have no investments. That is a pretty troubling statistic when these younger people have more time for growth and compounding.
Most people realize investing for the long term is smart. Investing in the stock market has proven to generate wealth, grow above inflation, and help countless people retire comfortably. I hear countless excuses and reasons why young professionals around my office aren’t investing. Many don’t have enough money yet afford some killer vacations. Others don’t want to ‘adult’ or don’t have the knowledge to invest. It is frustrating for me to see all of these smart people not investing for their future.
This article will be a crash course in how to just get invested. There is no need to overanalyze or talk yourself out of investing. People will find countless ways to not invest, coming up with a variety of reasons. The hardest part then becomes actually investing. Follow these steps to build a foundation for long-term investing success.
Log in to your company 401(k). Open an account with a discount brokerage with a $0 minimum. Here is a full list, but any one of them will do.
Next, pick and investment and put your $20, $100, or whatever amount and invest it. I am not advocating taking your life savings and dumping into one single investment at random. Start with an amount that would not wreck your finances if it lost money. Over time, this amount will increase depending on your goals, but just get a portion of money ready to invest.
The investment itself at this point matters very little, the point is just to invest. If it’s your 401(k), pick a target date fund or any other fund you find that sounds interesting. If you are at a brokerage firm, then find a company you know that you think will be around for 20 years or has been around for 20 years. No ‘penny stocks’ is the only rule here. Pick that company or an ETF with that company in it and invest.
Now you are not one of the majority that do not invest. You are immediately above average when it comes to using the stock market to grow wealth. It can take as little as 15 minutes to open an account, and after your funds come from your bank, you will be an investor in days.
Do not stress about the investment, or agonize over which choice to make. Pick the first company you like, the first fund that interests you and go for it. If it is only a small amount like $50 or $100 and it performs poorly, does that really upset you? Most people spend that kind of money every month throwing out food they never used or buying shit they don’t like, as my friends over at Bitches get Riches say.
Now that you are an investor, it is time to become the best investor that you can be.
Reassess Your Decisions
The hardest part that stops most people is now over. You have been thrown into investing. With this amount of money, you are only thrown into the shallow end, but you are in it none the less.
Now is the time to assess your investment and decide what to do next? Do you search for a more optimal investment that will fit your long-term needs? Was your first investment something you should invest more in? Are you ready to invest more money to reach your goals faster?
These are the types of questions to ask yourself. You are now armed with some knowledge and an ability to purchase investments for yourself. You may have found that it is not as intimidating as professionals make it seem, and you can navigate this on your own. Maybe you would like to consider a financial advisor, but want to avoid the sleazy ones!
You have now made an important long-term decision, whether you realize it or not. If your investment only returns 5% (S&P 500 average is around 7%), then ever $1.00 you invest now will be worth $4.32 in 30 years. This can be the difference between a great retirement and no retirement.
Knowledge is the next step to become an excellent investor. The books and blogs will not read themselves. No one will watch over your money as well as you, and you owe it to yourself to gain a basic knowledge of the stock market and financial topics.
Learning more does not involve listening to your crazy cousin give hot stock tips. No one else knows your situation, your goals, and your risk tolerance. Be wary of advice you get from people, as they may be one of the 54% that don’t even invest themselves. Get your knowledge from reputable websites, and buy the famous and well-respected finance books. They are popular for a reason.
Read More: How To Avoid a Sleazy Financial Advisor
The best lesson is definitely saved for last in this article. Discipline is the greatest strength for an investor. This helps take so much of the emotion out of investing.
Once you have built your plan and have chosen the investments, now discipline takes over to make sure you are successful. Motivation can be a fleeting emotion, while discipline can be there to help you when motivation may be lacking. Of course, we are all motivated to retire, but the discipline to actually perform the actions to make this happen is what sets happy retirees apart.
Be disciplined in investing regularly. This may be with every paycheck in your 401(k) or every month in your brokerage account. This should be a major priority in your budget, and an amount you should try to never lower. In fact, make sure to try and raise the amount you invest every month or year. It will force you to cut back on needless expenses and put money into funding your wealth creation.
Be disciplined to invest whether the market is going up or down. Understand that through the worst economic downturns, the market has always come back and corrections (a 10% drop in the market) happen on a regular basis and are a healthy part of the market. Do not lose your discipline, knowing that investing now will pay off when you retire.
Be disciplined in your learning as well. Do not stop learning and understanding more about your investments and investing in general. You can always find new topics to dig into, like tax optimization or charitable investing.
Investing doesn’t have to be an intimidating and frustrating pursuit. I think a majority of people are fearful of making a mistake and then find ways to never actually start investing. In reality, the fear of what happens when you don’t invest should scare people into investing and figuring out how to navigate the market.
I believe that most people can find some money to start investing. There are also millions of pages of books and the internet that gives people the knowledge to handle their investments. The average person doesn’t need much more than index funds, according to Buffett.
The point is to just start investing. If I would have done this at an earlier age, I would have much more money in my investment accounts. Also, if my dad never threw me into the swimming pool, I still may be research the best way to swim, save yourself from drowning, or buying the perfect life jacket. Jump into investing and learn to swim, just start in the shallow end. You may end up like this man, who donated two million dollars in stock, that he purchased for $1000 almost 70 years ago!
Thanks for reading! When did you first invest? Did you analyze every angle before investing or jump right in?