So you finally got started. Awesome! You have gotten over the hardest hurdle! You’ve set up your account and made your first trades based on products you know. Now what? If you read my last post on investing, then you will have read 5 tips to quickly get you started. This post is designed to take you a little bit further on your path to financial control. If you have not read my post “Thinking about investing. 5 tips to quickly get you started, you can read it here.
The Story
Early on as I dived into investing, I saw that there was a lot to learn. There is a lot of information out there, but a lot of it seems to assume a certain level of knowledge. As I dived in, over time it got easier and the conversation around the market and investing became clearer. I was able to find tools and sites that really helped me to get over that knowledge hurdle. The following tips will hopefully make your process easier than it was for me.
Investing Tips
Avoid timing the market – Most people do not know when to buy and when to sell. The speed of the market makes jumping on a position very difficult. Instead, put the same amount of money in the market each month. Yes, you will buy when the market is up and buy when the market is down. However if you wait, you could miss some of the best days to invest in the market.
Keep Investing costs low – Don’t let fees and costs eat into your investment. Paying for advice is good , but don’t pay for more than you need. A difference of 1% in costs can make a big difference in your profits over time.
Have a plan and stick to it – The best plan is to be long term. Don’t let downturns in the market throw you off your plan. Stay invested and stay diversified investing in global stocks, bonds and a little cash. Figure out how much do you need to save each year in order to retire?
Keep it Simple – There is no need to have 50 different stocks if you are a long term investor. Mutual funds and ETF’s can help you cover the world with just a few investments(6 -10). Doing this makes it easy to explain and easy to know.
- 1-2 Stock funds for the US Markets(1 lg cap, 1 Small cap fund).
- 1-2 International.
- 1 Money market.
- 1-2 Bonds.
Don’t leave money on the table – Don’t wait to invest. Compound interest is your friend. Compound interest is the interest you earn on interest. As an example, $6000 a year at a 6% return will earn you $360. If you do this every year you will earn interest on not just your initial $6000, but the $360 as well. Over time this money will grow. As an example, assuming a 6% return each year
- 10 years – $89.829
- 20 years – $239,956
- 30 Years – $508,810
- 40 Years – $990,286
This is the power of your money making money. Put it to work!
Get up to 10% Cash Back when you Dine & Shop Local with CouponSurfer RewardsInvest the maximum amount with pre-tax dollars – If your company has a 401k match program, it is good to invest at least up to the match to take advantage of the money you are being provided towards your 401k. I don’t like to consider this free money, because you still had to work. Instead see it as part of your compensation package. It is your money. Don’t leave it on the table!
Look for money to invest – Create a budget. We have all heard the term “Time is money”. When you are young, compound interest is on your side. Again, compound interest is the interest you earn on interest. The longer you let it grow, the better your return. When creating a budget, start small. Make your goals reasonable and attainable. This will help you get in the habit of saving and working within a budget. Cut back on subscriptions and services you no longer need. Scale back on expenses. Try to live without things you once thought you needed. Take that “new found” money and invest it! Click here for a Motley Fool budgeting tool that will help you out.
A great way to cut costs is to break off from cable and move towards streaming services. Take a look at my blog post, “7 tips to cutting the cord on your cable company“. In this post I talk about my experience cutting the cord with my wife. What we did and the savings we saw. Check it out here.
In conclusion, think about Investing in the stock market as a marathon instead of a sprint. There are no short cuts to this. Just stay invested, stay diversified and let time be your friend.
Helpful Tips
- Avoid Timing the Market – Instead be consistent and put in money each month.
- Keep Investing Costs Low – Don’t pay for more than you need. It will eat your profits.
- Have a Plan and Stick to it – Think long term, don’t let downturns in the market throw you off your plan.
- Keep it Simple – Make sure you understand your investments.
- Don’t leave money on the table – Compound interest is your friend.
- Invest the Maximum Amount with Pre-tax Dollars – Your employee match is a part of your compensation package. It’s your money.
- Look for money to invest – You may be surprised by how much money you can put towards investing. Create a budget.
What has your investing experience been like so far? Has it been good or bad? If you have any questions, please contact me and let me know. I also ask that if you like what you have read, then please take the time to subscribe, like and share. Doing this let’s me know what kind of topics resonate with you. I will post more on those topics.