I Want to Start Investing, But … (or, 8 Tips to Get You Started)
The Stock Market. Trading. NASDAQ. Investments. It’s an enormous, competitive and relentless sector of the financial industry that - while vitally important for everyday Americans in securing their future financial prosperity and security - can get really, really scary, especially when you don’t know where to start. But here’s the thing - trying to jump straight into the world of investing without having a foundational base of knowledge isn’t just frowned upon, it can be downright dangerous.
So… where to start?
You might want to jump straight into learning how to differentiate investment vehicles from one another, or subscribe to all of the top finance journals out there. You may start watching live streams of opening bells, IPOs and set up alerts on your phone that follow the ups and downs of the Dow Jones Industrial Average. You might just decide “fuck it” after watching a Crypto commercial (seriously, where are they all coming from?!) and throw your cash behind Bitcoin because, since it’s so visible and everyone’s talking about it, it must be a sure thing, right?
We think that’s a little much, to be honest. In fact, instead of focusing on the minutiae, definitions, day-to-day ups-and-downs of the market, the broad strokes are often the best way to start when learning about a new topic. Big picture ideas aren’t a bad place to start.
8 Tips to Get You Started on Your Investing Journey
1. Get Educated
There are a lot of different investment options out there, y’all - stocks, bonds, mutual funds, ETFs to name a few. And within those categories themselves are different investment varieties. Long story short? The world of investing is large, complicated, and contains millions conflicting opinions, recommendations and theories. But if what’s keeping you from taking that vital first step in creating your investment portfolio is lack of knowledge, there’s only one way to fix it - get yourself educated. Traditional sources - like Forbes and Fortune magazine - are always good places to start, but don’t be afraid to find sources and creators out there you can relate to, and who explain things in a way that works for you.
2. Lay Out and Understand Your Goals
Everyone’s financial journey is different, and a lot of that depends on what your goals, priorities and values are. What’s your main financial focus at the moment? Where do you see yourself in five, ten or 15 years? If that’s not so clear (life is weird, shit happens), try to visualize what this theoretical future would look like for you in regards to your money concerns and/or freedoms. Are you hyper fixated on credit card debt? Would you rather rent, or are you considering purchasing a home? Do you plan on having kids of your own? Adopting? Starting an animal rescue? If any of these eventualities recur in your day-to-day musings, figure out what you need in order to make them happen, and integrate them into your investment plan.
3. Establish Your Risk Tolerance
There is no reward without some kind of risk, and those words have never been truer than when discussing investments. Your risk tolerance - meaning, how much of your money you’re willing to put on the line - determines what you invest in, the financial vehicles in which you invest, and how much of your capital you’re investing. Now, risk tolerance changes over time. Often, younger folx are likely to have a higher risk tolerance because, frankly, if something goes wrong they have more time to make that money back. That’s a generalization, of course - plenty of older investors make “riskier” investments, while there are younger investors who prefer the “straight and narrow” approach. Your risk tolerance is determined by you - and it can always change.
4. Have a Game Plan
So, we have goals. We understand our risk tolerance. We’re educating ourselves day-by-day on the ins-and-outs of stocks, bonds, funds and all that jazz. Now, we’re ready to jump into investing head first, right? Eh, we’d say test the waters a bit first. If you’re Googling shit left and right, you might be thinking “Crypto is where it's at!” or “This stock is doing so great right now, you guys, we need to get in there ASAP,” when in reality, neither of those methods are actually giving you what you need. You have to come up with a game plan that works for you and your current means. Strategy is everything, Your Majesties.
5. Diversify
You know that saying “Don’t put all of your eggs in one basket?” That phrase, interestingly enough, originated from Don Quixote. And from our wayfaring donkey-riding errant knight all the way to Wall Street itself, this phrase perfectly encapsulates one of the investment community’s top idioms: diversify or die. Diversification essentially means creating an investment portfolio that contains a collection of different investment vehicles (stocks, bonds, funds) that - combined - reduces an investor’s overall profile. If one stock doesn’t do so well, or the company goes bankrupt, other stocks can pick up the slack. A diversified portfolio, essentially, protects your assets in the long term.
6. Consider Reinvesting
Once your investment game is in full swing, and your returns and/or gains are starting to make themselves known, it's super easy to look at those growing funds and think, “Ya know, I could treat myself,” or “I’ve wanted that new iPhone,” or any number of other things… when, in fact, what you could do is reinvest those returns back into your investment portfolio. Sure, it might not be the thing that you want to do at that moment (that dopamine rush is real), but it may be exactly what your investment portfolio needs in order to grow and continue hitting goals. Put those returns back into trusted funds, or maybe invest them into an ESG or SRI fund you’ve been eyeing up!
7. Don’t Panic
The thing about the economy is that she likes to get really really temperamental. A period of intense economic growth and expansion will always be met with a period of hardship and contraction (also called recessions or, in serious cases, depressions). Funds aren’t going to do well all of the time. The best investment vehicles out there have an overall, overarching trend of upward growth. During recessions, your portfolio may suffer… but panicking and selling off all of your assets isn’t the way to go about things, especially if you’re like us and want investments that support long-term and stable growth for your future.
8. Patience, Patience, Patience
We get it. We want all the things, all the time, and we want them right fucking now, okay? That collective mentality is probably part scarcity mindset, and definitely part “we live in a consumerist hellscape.” And we, as modern day people ✨living in a society✨ want nothing more than cold hard cash, right? Money doesn’t equal happiness, but it sure as shit doesn’t make us sad… but with your investments, you’re going to have to hold off and wait, okay? Part of what makes investments so successful as long-term vehicles for financial success is a thing called compounding interest. And what makes compounding interest so effective? Time, time and more time. If you’re not seeing the returns you’d expect, feel free to do a little evaluating to make sure your game plan is still working for you. If nothing is amiss? Sit back and wait. Short term discomfort beats long-term pain by a longshot, y’all.
Again, the sector of finance that focuses on investments is… well, pretty overwhelming. Especially when considering the consistent and reliable volatility of the global economy (thanks, business cycle). We know that having some kind of investment portfolio - even if it’s as simple as an-employer matched 401(k) - is vital for our future financial security, but we’re also desperately aware of how many things can go wrong, since we all know so very little about how it all works.
And that’s been by design.
The powers that be don’t want everyday people to understand the market and use it to their advantage. And even when average citizens figure out the system and make it their bitch, the Man finds a way to put a stop to it somehow (*cough* GameStop-Robinhood *cough*). But not partaking in a vital aspect of your financial future due to fear isn’t just giving into the Man’s demands… it’s shorting yourself. That’s why taking the first step - whether that’s reading this blog, or checking out our “Investing 101” episode of Confident Money with Katelyn Magnuson, or subscribing to a financial newsletter that can explain all of this to you in layman’s terms - is so vital.
It’s your future and your money. And big ideas lead to Big Results Tomorrow. 😉
Disclaimer: The information provided in this blog is for educational purposes only and does not constitute financial or tax advice. Reach out to The Freelance CFO team with any questions regarding specific financial concerns, or seek the services of a fiduciary.
