7 Simple Steps to Start Investing (TL;DR Edition)
This is an abbreviated edition of my earlier blog that goes into much more detail about each step. This version is a summarized edition, and I am still the original author. If you want to read the detailed version, check out this edition!
Investing is a platform to earn passive income, or letting your money earn money while you sleep, so to speak.
Step 1: Stop Convincing Yourself That The Stock Market is Only For the Rich
Investing has never been easier to start, and the longer you convince yourself that you can’t do it, the more harm you’re causing yourself. A brokerage like Wealthfront or Betterment is the best hands-free platform you can start. They take care of everything for an extremely low fee.
Step 2: Determine Your Time Horizon
Time Horizon refers to how long you plan to let your investment accrue profit & gains. The longer your money is invested, the higher your chances at earning more money, thanks to the beauty of compounding interest.
The stock market is a place where money transfers from the impatient to the patient.
— Warren Buffett
Step 3: Determine Your Risk Factor
Crashes and slides are inevitable, so determining your risk factor will help a Robo Advisor like Wealthfront manage your emotions during tougher times. The higher your risk tolerance is, the greater you can withstand periods of volatility without making erratic changes to your investment strategy and thereby hurting future profits.
Risk tolerance and time horizon should parallel each other. The longer your time horizon, the higher your risk factor can be.
The time to buy is when there’s blood in the streets.
— 18th Century Contrarian Investor, Baron Rothschild
Step 4: Come Up With a Budget Plan
Contributing a fixed dollar amount towards your investment portfolio is as important as paying your monthly bills. Once your home, food, and living needs are taken care of, your investments come next. A personal retirement account is most likely going to be your only source of income in the golden days, so it needs to be a top priority.
Step 5: Open a Personal Account
I’ve been using Wealthfront to manage my retirement account, and I highly highly highly recommend using them. Use this link to get a complete fee reduction on your first $5,000 invested with Wealthfront! Even though their fees are insanely low, any opportunity to lower them is going to result with more money directly in your account.
When you set up a Wealthfront account, you’ll be prompted to decide between a Roth IRA or a Traditional IRA. Continue setting up your account by determining your risk tolerance.
Whenever a particular asset class rises or falls from the target allocation your risk factor has determined, Wealthfront will automatically rebalance your portfolio for you. This allows you to begin investing without needing to know all of the details that go into the process.
Step 6: Set Up a Recurring Deposit
A fixed monthly deposit is a good way to keep your immediate contribution relatively low compared to a yearly lump sum. Monthly deposits take advantage of dollar cost averaging at the expense of less money invested immediately.
Step 7: Wait a Long Time
Now we play the waiting game. In the span of the 20–30 years while your investment grows, the stock market will ride a wild roller coaster. There will be times of incredible growth as well as periods of rapid decline. These ebbs and flows are part of the game, so patience is key and eyes on the prize is critical.
Financial Disclaimers I Must Disclose
The above text is not financial advice, but rather a platform to present educational information on investment strategies. The information is sourced from books, articles, and encyclopedias. I share this information to a target audience of young adults who want to begin investing, not to seasoned investors speculating how to day trade based off chart analysis. Any investments that you do are of your own risk and responsibility, and you must accept the consequences of investing in the stock market. Past performance does not guarantee future results. Seek the services of a Registered Fiduciary Advisor should you need help with substantial investments.
Archives
If you want to navigate through my other blogs, you can use this archives section. (Updated periodically)
Blog 1: The Fastest Way to Double Your Money — Manage My Money (Part 1)
This is the why behind the how. This blog broadly covers the importance of why you need to start investing ASAP.
Blog 2: Money Now or Money Later — Manage My Money (Part 2)
This is the step-by-step plan you need to follow so you can get yourself investing ASAP in 2021.
Blog 3: The 5 Best Investment Platforms You Need to be Using in 2021 — Manage My Money (Part 3)
I share some of the investing platforms that I’ve been using and I give my pros/cons on which ones I recommend. There’s also some referral links that’ll give both of us free stocks!
Blog 4: Compounding Interest — Investor Insight (Part 1)
This blog breaks down the beauty of compounding interest to give you enough information on why you need to start investing ASAP.
Blog 5: Pick the Right Retirement Account in 2021 — Manage My Money (Part 4)
This blog breaks down the differences between Roth and Traditional retirement accounts like a 401k and an IRA. It’s all about strategizing your taxes!
Blog 6: What to Do if Your Stock Drops — Investor Insight (Part 2)
In this blog I share some strategies you can use to help mitigate potential losses in your portfolio, such as dollar cost averaging and tax loss harvesting.
Blog 7: Best Stocks to Pick in 2021 — Investor Insight (Part 3)
In this blog I emphasize the importance of ETF’s that track the entire market, as well as differentiate between growth and value stocks, blue chips vs penny stocks, etc.
Blog 8: Even if You Bought $TSLA 10 Years Ago You Wouldn’t Have Become a Millionaire
In this unusual blog I break down the reality about survivorship bias and our overconfidence in our ability to hit the home runs. I demonstrate how non-buyers remorse when it comes to stocks like $TSLA should not hinder your decisions in the future.
Blog 9: The Game Stops Wall Street
This unusual blog follows the chaotic events that GameStop stock to soar, halting trades along Robinhood while Wall Street’s hedge funds panic in loss.
Blog 10: What’s a Dividend?
In this blog I break down one of the best fundamental elements of investing, and how taking advantage of time in the market will result in a liveable income when it’s time to retire.
Blog 11: 7 Simple Steps to Begin Investing
In this blog I make it simple for you: follow these 7 simple steps to get started investing. While this blog specializes in a retirement account, the principles can be translated to a regular investing account as well.
Blog 11(2): 7 Simple Steps to Begin Investing (TD;DR Edition) (this blog)
This is the shortened edition of the 11th blog designed to give you nothing but the most important steps!
