How to Start Investing

Are you interested in starting investing? Here are the essentials you need from the different types of investment vehicles, trading platforms, and investing strategies!

Don’t want to read? Click here to check out my YouTube video on this topic!

TYPES OF INVESTMENT VEHICLES

So what is an investment vehicle? Well, it’s really just a tool used to invest your money. Some of the most common are 401k, traditional IRA, Roth IRA, and individual investment accounts. Within each of these, you can invest in a wide range of investments from stocks, bonds, foreign exchange, options, crypto, funds, and more. 

A 401k is a retirement account that is offered through a company you work for. Traditional and Roth IRAs are other retirement accounts that you would typically set up on your own. Each of these has its own benefits, particularly dealing with taxation, but they also have their downsides in that you can be penalized for taking money out early. Either way, I highly recommend contributing to a 401k if your company offers it, but only if there is a company match. Otherwise, retirement accounts can be pretty effective in building long-term wealth. If you can be disciplined enough, nowadays, you really don’t even need to invest in a retirement account.

Now that online trading is free using most brokerages, you can effectively do all the same things as a retirement account, with nominal or no fees, plus your money will be liquid and will not be subject to penalties for withdrawing early, although you will be taxed.

TRADING PLATFORMS

There are so many platforms out there that it can be a little confusing to figure out which one to choose. There’s Etrade, Fidelity, Robinhood, WeBull, Charles Schwabb, and a ton more. It seems like everybody is trying to get into the investment brokerage business.

But essentially they are all more or less the same, I use all of the ones I mentioned above for different reasons because I like to track my money based on investment type. I use Etrade for medium to long term investments, Fidelity for my 401k, Robinhood for dividend investing, Charles Schwabb for my IRA, and WeBull for my riskier investments like options trading and a bit of day trading here and there. The point is you can use any of these platforms. WeBull and Robinhood are my choices for mobile investing and as their platforms are the easiest to use, in my opinion. I have a link for each of these platforms so that if you sign up you’ll get 2 free stocks with WeBull and 1 free stock with Robinhood.

INVESTMENT STRATEGIES

So what are the best investment strategies? Well, I recommend sticking to stocks and index funds, especially when starting out. Long term investing is always the best option and consistently is proven to make you money in the long term. 

The key is to continually invest in companies you believe in that make money or good index funds like the S&P 500. You can invest monthly or weekly and over time you can expect your money to grow handsomely. The average return on the S&P 500 is about 7% per year. 

Day trading can get pretty risky, especially now and the issue with it is that it is a full-time job. I day traded for a little while and it, unfortunately, took over my life because I was constantly looking for the next opportunity. So it got to the point where I wasn’t letting my money work for me, I was working for my money. So for now, I’ve significantly reduced my day trading as it can be almost like gambling.

In conclusion, investing is pretty simple once you get started, it is essentially buying stocks, holding for a little while, and selling for a profit. 

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7 Steps For Financial Freedom

Are you searching for ways to achieve complete financial freedom? Here are the steps you should take in your personal finance journey to set up your life to live financially free.

Don’t want to read? Click here to check out my YouTube video on this topic!

WHAT IS FINANCIAL FREEDOM?

Financial freedom is having 0 debt and enough money to live comfortably in retirement. This blog is going to cover the basic steps to do this in a traditional career path.

STEP 1: INVEST IN 401K UP TO COMPANY MATCH

First thing is first, you have to pay yourself first - this means investing for your retirement.

If your company offers a 401k match, you need to contribute up to that match because not only are you not investing in your retirement and losing out on years of compound interest, you are also not capitalizing on free money that your company would otherwise also contribute to you.

STEP 2: SAVE 1 MONTH EMERGENCY FUND

40% of Americans are not able to cover an unexpected $400 expense. You don’t want to be part of this statistic. 

Now more than ever it is apparent how critical having a savings account is and having 1 month of expenses saved up will help you if you have any sort of emergency, including broken appliances, medical expenses, layoffs, etc.

 I recommend putting this money in a “high-yield” savings account to keep this money liquid.

STEP 3: PAY OFF BAD DEBT

Bad debt really is anything with high-interest rates that does not contribute to your assets. Some of these include credit card debt, car loans, and yes, student loans.

You will want to pay these off as soon as possible, my recommendation is to pay the debt with the highest interest rate first, but some may prefer the “snowball method” of paying off the smallest amounts first. Either way, you want to get these financial burdens off of your plate.

STEP 4: SAVE 3-6 MONTH EMERGENCY FUND

Now that the bad debt is cleared up, we need to save for a bigger emergency as 1 month of expenses really limited if things go bad fast.

Depending on your career and risk tolerance, you will want to save 3-6 months of expense. You can mix these savings between high yield savings and bonds (maybe even index funds if you have a higher risk tolerance), but I recommend saving in low-risk investments or just putting it all in a high-yield savings account and calling it a day. This is your safety net and it should not be used as a high-risk fund.

STEP 5: INVEST 20% OF GROSS INCOME IN INDEX FUNDS

When you have your emergency fund set, we can now work on accumulating wealth. This means investing 20% of your gross income into index funds. You can do this in your 401k, IRA, brokerage accounts, etc.

Putting away 20% per year is all part of paying yourself first and with index funds averaging about 7% returns per year, the compounding effect will be substantial when you are of retirement age. 

No matter what the stock market does, keep investing. I recommend that you automate this so that you don’t get tempted to make unwise decisions based on fear or greed.

STEP 6: BUY PROPERTY

The investment that makes the most people become millionaires is real estate.

Your ideal property should have monthly expenses that are 30% of your gross monthly income. The expenses should include, the mortgage, interest, taxes, insurance, and HOA.

STEP 7: PAY OFF DEBTS OR MAKE INVESTMENTS         

The last step is to clean up your debts and make other investments with your excess cash. 

The largest expense in retirement is typically living expenses. By this time, you should pay off the rest of your mortgage to lessen your expenses.

After you have paid off your mortgage, I recommend using your excess funds to either save, invest in riskier assets, donate, really whatever you want!

Once you’ve completed all of these steps, you should be financially free and independent!

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