It’s official: one of the few places in this world that are millennial free is the stock market. A lack of funds and a lack of understanding about how it works is what’s preventing our blossoming generation from investing. However failing to invest, especially while young, can cause you to miss out on decades of returns. Choosing to stash your cash in a savings account instead of the stock market could cost you six- or –seven figures over your lifetime.
Basically, you can’t afford not to invest.
Nevertheless, there will be obvious hesitation because what do you know about investing?! You probably have questions about what exactly investing is and how to get started — which is where we come in.
1. What exactly is investing?
In short, to invest means to use your money to make more money. Anything that earns you a return on your capital is an investment. Technically savings accounts are a type of investment because you earn interest on your deposit.
2. How do I get started investing?
It’s never been easier or more affordable to access the stock market, because you can do all of your money management online. In the past, investors had to work through a broker at their bank or over the phone, but now you can buy and sell investments with the click of a mouse. You are still able to use a broker, but they charge a fee to manage your investments.
Setting up your investment account takes about 1 week and requires an application and some initial contributions to seed the account with some starter funds. After that, you’re good to go.
3. How much money do I need to get started investing?
Most people are surprised how little it takes to get started investing in the stock market. You can begin investing in mutual funds with as little as $25 or $50. Or you can open a brokerage account with between $1,000 and $5,000. The more you have to invest, the sooner you’ll start seeing a real return on your money.
It is recommended to start with $1,000. You may start with more, but since timing in the market matters it’s not worth the opportunity cost of waiting until you have $5,000 or $10,000 in the bank to jump into the stock market.
Be sure that the funds used to invest is not money you will be needing within a short period of time. It should also not be your emergency fund, as the stock market goes through highs and lows.
4. What should I invest in?
What you should invest in depends on two things: your risk tolerance and your investment knowledge — both of these are likely to change over time.
As a new and inexperienced investor your primary objectives should be getting into the habit of investing, learning the language of finance, and getting used to watching the value of your portfolio fluctuate with the market.
5. Where can I learn more about investing?
If you don’t know what you’re doing then you’re not investing — you’re gambling.
Many people think investing in the stock market is “risky”, but that’s only true if you don’t know what you’re doing and you don’t have a plan.
To really profit in the stock market, you have to invest as much time in your education as you do money in your account. Some of the best places to learn about investing are:
- Personal finance blogs;
- Directly from your brokerage or bank;
- Personal finance books; and
- Websites like Google Finance, Investopedia, and Marketwatch.
The more you learn about investing, the more confident you’ll feel managing your own portfolio, and the more you’ll be able to earn in the stock market.