How To Start Investing

Have you been interested in investing and not sure where to get started? Follow this guide to show you the step-by-step process to help make the best investment for you.

Establishing an Investment Baseline

Overall, the S&P 500 which includes some of the top companies in the US, has averaged a return around 10% over the last 50 years. This should be your baseline when you are looking for an investment. You should know that by the law of averages, you can expect to make that kind of return by investing into something that is called an Index Fund. Index Funds are funds managed by investment managers that hand pick certain stocks and put them into groups that they believe will be successful. Vanguard which have some of the most popular mutual funds, has a fund that actually tracks the S&P 500 where you could receive that kind of return. Looking at any investment, you should seek this type of return. (NOTE: This can be more volatile than other investment strategies and can have many ups and downs)

How Much Money Should I Invest?

A healthy amount of income to start saving for investment opportunities would be anywhere from 10-15% outside of your retirement. Using apps like Robinhood and others withdrawal the money for you and put it straight into your Robinhood account. You can set up regular weekly withdrawals that will be money that you can’t touch and will go straight towards investing. If you cannot afford to make this happen, start with the money that you would consider disposable income and grow from there.

Investing in Stocks

Getting started in investing in stocks has never been so easy and you don’t even need that much money. There are plenty of tools for new investors such as Robinhood and Stash that allow you to invest in what is described as a fractional share. This allows you to put whatever money you do have towards a company or stock and go in with other investors to allow you to still be able to buy that company and earn the return that they may potentially gain. This has made investing easier than ever before. Robinhood also does not charge transaction fees so trading stocks does not have the hidden fees that were apart of trading in the past. There are different investing strategies that come with stocks. Some people short stocks (which is becoming more common), some keep them until retirement, others buy stocks that earn dividends, and others trade options.

Shorting Stocks

Shorting stocks is the process of keeping a stock for a short amount of time because you believe that it will go up in the near future. When people hear news of a new and exciting product or a new manufacturing process that will drive costs down and increase profitability they may short the stock for a temporary gain they believe will happen.

Lets use Amazon as an example. After all stocks took a nosedive due to the news of the economy being shut down because of COVID, many become bullish on Amazon because of their ability to fill a need for people not wanting to leave their house and have necessities shipped to their house.

Teladoc is another example. Many felt like going to the doctor was a bad idea because of all the sick people that could potentially infect you. On the belief that more people would be using Teladoc (Where you can facetime or talk to the doctor on the phone) the stock price went from $115 to over $190 in a month. If you confident in a short term rise in a stock due to a changing market condition, shorting a stock may be the right option for you.

Buying Long-Term Stocks

Buying long term stocks is getting a company that you think is going to continue to grow over time and has a bright future. Some companies what Warren Buffet would call having an “Economic Moat” are also popular stocks to keep over time. This means that there brand or their products are so great that other rival competitors can’t touch it.

Disney is the perfect example of having an Economic Moat and creating new revenue streams to help them to continue to grow. They have built a brand that would be considered untouchable and have brought new revenue streams in such as Disney + that has allowed them to continue to grow. Taking these factors, into account you may consider buying a stock that will keep its value long-term such as this.

Another popular long-term investment is investing in an index fund. This way you dont feel like you always have to know what is going on, because someone else is managing the fund and keeping up with all that. Most investors who put their money in these funds actually outperform those who invest in stocks! Look up Vanguard Index funds and see the variety of types they have as you may be able to find the right one for you.

Dividend-Earning Stocks

Dividend earning stocks is another strategy to really grow your wealth over time. These stocks have quarterly payouts out of their profits to their investors which are considered dividends. To really make money on dividends, you keeping a steady growing company over time will help these payouts compound.

Coke would be a great example of what a good Dividend stock looks like. Consider that Warren Buffet bought Coke for about $2.45 a share in 1988 and 1999 and is now worth north of $50. The stock has most recently paid out dividends of $.41. That means if it paid out the same dividend each quarter it would earn $1.64 each year per share. That means that Warren Buffet is getting a yearly payout of 67% of his original payout of $2.45 a share! Finding a stock like this would be an amazing investment.

Options Trading

Options trading is the practice of buying a contract to a certain stock in hopes that it will go up or down. Options can be a trickier way of investing and something that I would not recommend especially if I was a beginner. You essentially are betting that the stock price will go up or down by a certain date. You can sell the stock until that date but your contract value will continue to go up or down depending on the share price. If you feel confident short-term losses or gains, an options contract may be the right choice for you.

Our Stock Investing Tool that Shows Your Possible Returns

Ever wonder how much money could you really make from investing? We have designed a tool with some of the top companies in the U.S that will show you what type of returns you could have made if you would have invested into them 2 years ago. (Check out our tool here)

Here are 3 ways that this tool will show you what type of money you may be missing out on by not investing:

• Some of the Biggest Companies in the U.S yielded some very large returns in the last 2 years. Amazon and Apple to name a few. One important thing to remember is that these types or returns should not be expected. They ARE possible, but don’t expect to start investing and see these types of returns. Typical returns each year range from 10 – 11%.
• Mutual Funds and ETFs are great investments too especially for beginner investors. Some beginners may ask what is an ETF? It is a security that is comprised of different companies handpicked by a management company that decides what is in that security’s portfolio. The most popular ETFs are run by Vanguard. Take a look at what type of returns they VGT ETF have yielded in the past 2 years.
• You don’t need a significant amount of money to get meaningful returns. The days of trading and being charged fees are over. Apps like Robinhood has made investing very easy and accessible to anybody.

Investing In Real Estate

Fundrise or Crowdstreet

Technology has given investors opportunity to invest in ways never had before. Fundrise and Crowdstreet allow you to invest into commercial real estate and not have to have all the upfront capital to be sole owner. You are basically becoming part-owner of a selected property that you get dividends, and returns from. I have not used these applications before, but have heard good things. This would be great for an investor that does not have the capital to invest in real estate as a sole owner, but want to get involved in this market.

Buying a Duplex

Buying a duplex may not be the most sexy thing, but this can do wonders to building your net worth. For first time home buyers, if you bought a duplex you could live in one side and rent out the other. If you are not a fan of these, buy a rancher with a basement apartment you could rent out. The beautiful thing about buying a duplex is that it could potentially pay your mortgage each month if you pay the right price. This gives you more capital to invest in something else, or get your house paid off much faster than you ever thought possible. This can easily be one of the fastest ways you can build your net worth.

Flipping Houses

There are many potential avenues to making money with real estate depending on your financial situation. You can invest through traditional ways such as flipping houses. (This could potentially double as a Side Hustle and a Investment) Real estate can be one of the quickest ways to build wealth. If you have a little know how to work on houses, flipping them for a profit could be the right option for you. I grew up working with my Dad who did this for a living and was very successful at it. Here are some of the keys to make it work:

-Knowing your numbers

Always check comparable in the neighborhood to see if you are getting a good deal. You can use tools like Zillow that easily allow you to compare recently sold or listed houses. If you are flipping the house, you also need to account for all the costs of repairs. This may mean that you may have to settle for more cost effective fixtures, countertops, etc. Other important numbers you should think about are listing and realtor fees. They can add up when doing multiple transactions. If you are able to know your numbers, you are already starting off on the right foot.

-Knowledge in Home Repairs

I am a firm believer in being able to figure out things as you go, but this needs to be a must in order to make a profit. If you hire out all of your work, it will be extremely hard for you to make money. Contractors also will be able to tell when you don’t know what you are talking about, and could potentially take advantage of you without you knowing. Be vigilant, and know your skillset because this can be a massive undertaking.

-Time to spare

Be aware of the huge time commitment that this can be as well. Depending on the condition of the house it could take several months and even up to a year before you are able to finish. You will have to sit on what will seem like a capital sucker that doesn’t seem to generate returns. As long as you are good with these conditions, flipping a house may be right for you.