It’s never too early to start investing. In fact, the sooner you start investing, the sooner you will be on your way to retirement and financial freedom. The more investments you put your money into, the more opportunity you create for a larger financial return. These days it’s hard to imagine having to wait until you’re 65 years old to retire, especially when there are so many cool places to visit, loved ones to spend time with, and events/activities to attend — so why wait until you’re 65 to retire? If you start your investing journey now you can plan to retire as early as you want and spend your days doing anything you desire. In this article we’ll dive into the basics on how to start your investing journey.
WHAT DOES IT MEAN TO INVEST IN STOCKS?
Investing in a stock simply means you are buying shares of ownership in a publicly traded company. Examples of publicly traded companies are Coca-Cola (KO), Apple (AAPL), Target (TGT), Spotify (SPOT) and more, the list can go on and on. When you purchase a “share” of a company you own a “stock” of that company. Historically, share prices have increased over time so the idea is to invest in a stock when you’re young and let it grow over time — leaving you with an excess amount.
HOW DO I START INVESTING IN STOCKS?
It’s never been easier to start investing in stocks from the comfort of your own home. There are a number of online brokerages that you can join — some of which include M1 Finance, Robinhood, TD Ameritrade Ect. The good thing is these days it is free for retail investors to trade stocks on most platforms which gives investing in the stock market a very low barrier to entry for just about anyone.
WHAT ARE THE RISKS OF INVESTING?
It’s important to fully understand the risk involved when investing. There are different methods of investing that have higher and lower risk involved — so it’s important to always do market research before making any investment decisions. Although “trends” have historically increased over time, there is always a risk that an investment may not increase. Never invest with all of your money, be sure you always have a savings account tucked away for emergency purposes.
Diversification is something to keep in mind when starting your portfolio of stocks and bonds. Diversification is defined on Fool.com by “diversified portfolio is a collection of different investments that combine to reduce an investor’s overall risk profile. Diversification includes owning stocks from several different industries, countries, and risk profiles, as well as other investments such as bonds, commodities, and real estate.” In simple terms it can be a good idea to not put all your eggs in one basket, but instead build your portfolio with numerous types of companies in various industries ect.
When investing in the stock market, one of the most important and amazing things you will benefit from long term is something called Compounded Interest. Compound interest as defined on Investopedia being the “interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.” In simple terms compound interest is when your money earns money… Then that money earns more money… Which then earns more money.