It seems like everyone is investing nowadays. You can’t turn on the tv without seeing an ad for a broker app and stock market tips are all over social media.
We are all starting to realize that just saving money isn’t gonna cut it. But how do you start investing?
Saving is losing
Savin is losing. There, I said it.
Inflation rates are sky high and they are surpassing interest rates on savings accounts by miles. This means that you are losing money without spending it.
The best way to combat inflation? Investing.
Investing = putting money into financial schemes, shares, property… with the expectation of achieving a profit.
Getting your money invested is what will keep it in the running. It means that you are actively participating in the economy and your hard earned cash is not going to waste.
“Sure Valerie, that’s nice and all, but where do I even start?”
I get that investing can seem daunting. It took me years to get started because I was convinced that the stock market was a playground of the rich only. I also thought it was too dangerous to put my savings on the line. What if I lost it all?
Luckily, I learned a lot in the past couple of years and I know now that you can start with small amounts and that taking huge risks is not necessary.
Follow these steps to start investing
- First of all: you need to set goals. Knowing what you want to do with your money is crucial because it will give you the motivation you need. I want you to really visualize this: do you want a nice house in 10 years? Do you want to send your future kids to a private school? Do you want to take care of your loved ones after you die, donate to charity, buy a condo in Thailand… Whatever it is you want, write it down and revisit that goal from time to time.
- Secondly, you need to take a look at your financial situation. Track your expenses and see where you are at financially. See if you are overspending on things you don’t need. Maybe you can save on things you weren’t even aware of you bought. Look for ways to increase your income if you’re short on money and can’t cut back. Calculate what you could set aside every month. This is also important to determine how much risk you can take.
- Now it’s time to learn about the stock market. It is in fact like any other market: a place where buyers and sellers come together. You can choose from the range of products and pick the ones that are interesting to you. In order to choose you need to know the basic products: stocks, mutual funds and ETF’s. Select the products that will make up your portfolio following a strategy. That strategy is based upon your risk profile and financial situation. That’s why it is really important to go through those first steps before you are even taking a look at the stock market.
- Lastly, you need to pick a broker. A broker is your gateway to the stock market. They facilitate your transactions. See if the broker of your choice offers advice if you want that, check the fees and the available markets.
Stock market products for beginning investors
- Stocks: fractions of a company. You have a direct link to the company and get to share in their wins and losses.
- Mutual funds: a basket of securities that commonly consists of bonds and stocks. They are manually built by fund managers. Mutual funds allow you to diversify without having to buy all underlying stocks separately.
- ETF’s: exchange traded fund. Similar to a mutual fund but this product is not managed actively, meaning you also get the diversification but at a lower cost. ETF’s are traded all day long just like stocks.
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P.s.: Are you eager to learn more about investing? Check out my online course “Newbie to investor”. It contains everything you need to know to get started.
