As a young adult, just getting started in investing and compounding your hard earned money can be a very daunting task. I myself am no expert but I can speak for what tools and tips I used to make this process less intimidating.
RESEARCH. Now I know this may sound like a very evident thing to do when you start but most people don’t put in the time and effort into seeing what platforms would best suit their investing needs. How much money will you be contributing every month? Are you willing to be risky or would rather take a more safe route? After that you need to ask yourself will you buying ETF’s, options, fractional shares, whole shares, there’s so many alternative routes and if you're like me you're probably thinking, what the hell do those words mean Max. No need to worry, my upcoming blogs will teach you everything you need to know about the different types of ways to invest your money. But like I said, let’s start with the basics.
Pick a platform. For most people who just need an in into this multi trillion dollar market I would suggest Robinhood. Now it is a beginner platform but for a common mans investing purposes its all you’ll need for now. It is simple, intuitive, and has no trading fees or commissions which will allow you to make mistakes. A new and upcoming platform I’ve been drawn to is Acorns. This automatically invests change after a transactions and offers cash back at select retailers. Just bought a burger for $4.54, fantastic, you also just invested 46 cents into Google!
Set your budget. Set a percent in your head of how much money you will be contributing every month and stick to it. Consistency is key. Now i’m not saying to start living the most frugal of frugal lifestyles but we can all agree we could spend a bit less and things we don’t need. For me, as a high school student who mainly only spends his money on gas and the newest Supreme drop, I try to invest about 30% of every paycheck I get. This is a good happy medium for me that allows me to continue my lifestyle while setting me up for financial freedom in the future. Now for an adult financial planners suggest saving between 13% and 17%. This is a flexible number however and is entirely based on a persons specific needs and situation. I would suggest not going below 15% for the first 12 months as it will give u a good reserve in the beginning.
How will you be investing? If you want to be more hands off then ETF’s will be a good course of action for starting out. To keep this short an ETF is basically a bundle of assets which grants less risk but also generally less reward. For example one of the most popular ETF’s is the S&P 500 which in the last 30 years has yielded an average yearly return rate of 9.67% (7.31% when adjusted for inflation). For someone who wants to be more hands on and really take time to learn the space is options and puts which is a good alternative. You are essentially guessing how the market will react and placing bets on what you think will happen. This requires maximum attention to daily business news along with what is happening in the global economy and often yields heavy losses for people who don’t know what they're doing. But as i’ve repeated, do your research and start with the basics.
Join me for my next blog in which we will get more in depth on picking you platform and will be split up between 2 parts so are sure to subscribe to my news letter so we can continue on this journey together!
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