How to Start Investing

Getting Started

Many brokerages don’t require a minimum account balance that you can choose from.

Here are a few:

https://www.schwab.com/client-home

https://www.fidelity.com/

Once you open an account, start reviewing your savings with SwipeSwipe. Every time you save a few bucks, deposit that money into your investment account. This in essence will create something very close to dollar cost averaging and will help you over long term.

Also, if you can, try to automate a small amount to be invested from each paycheck that you get. A little takes you a long way. Any small amount that you can do is already awesome!

Talk to a Financial Advisor

You you don’t need to be rich to talk to a financial advisor. You can find one at your local bank, credit union or online.

Just out
https://brokercheck.finra.org/ to ensure that they are reliable and don’t have any complaints against them.

Knowing what to Buy

Research shows that for most people passive investments work best. What does that mean? Simply buy index funds, and hold them for a long period of time.

Two indices that have worked well in the past and are worth considering are S&P 500 and Russel 2000.

For S&P 500 consider: VFIAX and FXAIX

For Russel 2000 consider: VTWO and IWM

How much should I get of each?

It’s up to you and your advisor to decide. One thing to remember is ensure that you have some savings as well, not just long-term investments. Always make sure that you put 10% to 20% into your savings for emergency situations.

Russel 2000 is more volatile and riskier than S&P 500, however if you can invest for 10 years or more it can provide a potentially higher return. So, depending on your time horizon and risk preferences you can decide whether to include 10% or 50% of Russel 2000 in your portfolio.

Example Investment

I just saved $100 because SwipeSwipe stopped me from impulse buying an item. I can then deposit that money into my brokerage account, and buy $50 of VFIAX, $30 of VTWO and I keep $20 in cash.

I also realized that I can automate $50 from my weekly paycheck. So, I set up an automated transfer from my checking account to my investment account. Using that, I buy $25 of VFIAX, $15 of VTWO and I keep $10 in cash.

Below you see charts of returns for S&P 500 over a 20 year period.

Trick 1:

Don’t try to outsmart the market, don’t trade. If for whatever reason you have to trade, then allocate only 5% of your portfolio to trading and do in a different investment account. Do not trade from your long-term investment account. 

Trick 2:

If you have a 401K account at work, maximize savings and investments into that account first. Or for that matter into any retirement account such as Roth IRA first, before investing in other accounts, it provides tremendous tax benefits.

Disclaimer: 

We are not financial advisors, and we are not qualified licensed investment advisors. We will not and cannot be held liable for any actions you take as a result of anything you read here.

Further Reading

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