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There is a big difference between investing and dumping your money.
People always say that the best thing you can to do when you want to invest is to jump in, but, do you really know how to start investing?
It’s a scary feeling to start investing when you’ve never done it before. Even if you have done it in the past, it can be stressful and overwhelming.
In this post, I hope to help you making the right decisions when you invest your money for the first time. I’ve included a list with some points covering things you need to think and consider before you invest your money.
The sooner to start investing, the sooner you will get money for:
- Your first house.
- Your retirement (you can retire sooner too).
- Your kid’s education.
- Whatever you want.
Investing is important because you can get more money back (your money will work for you).
Saving money and not investing is one of the biggest mistakes that most of the people do. Did you know that every year you are losing a percentage of your savings due to the inflation rate?
What is the inflation rate? The inflation rate is a general increase in prices and fall in the purchasing value of money (therefore every year your money loses value).
In 2016, the inflation rate was 2.07% in the USA, this means that on average the price of living costs a 2.07% more than in 2015 (house rent, interest rates, bills, groceries, etc.). Therefore, if you have $100,000 saved in your account, you can buy less with your money. In other words, you would have lost $2,070 just in one year!
To avoid the inflation problem, you want to invest in order to get back the lost money value. If you invest some of that money, for example, $10,000, you can turn it into $20,000 or even more.
Below are some points you should go through before you invest your money.
Steps To Take To Invest Your First Dollar
1. Make a money saving plan.
My top investing tip is to start putting aside money right now. This will help you having an investing fund that you can use every time an investing opportunity pops up.
Every month I put some money aside so I can use it only for investing purposes. This is great because I don’t feel like I take money from my main savings account.
The amount of money you save is up to you, but I recommend the more you can afford the better.
Tip! I strongly recommend that you check out Personal Capital if you are interested in taking control of your finances. Personal Capital allows you to manage all your financial accounts from one dashboard. You can connect all your accounts together (mortgage, retirement account, credit card account, investment account, etc). The best thing is that is completely FREE!
2. Research, research and research.
This is one of the most important steps. You shouldn’t start dumping your money in things that you don’t completely understand.
First, you need to analyse the pros and cons of the investment you want to do. Investing in the stock market can be lucrative but it’s risky.
As a rule of thumb, if you are not completely sure whether to do an investment or not, just keep reading on the subject until you are 100% sure that’s the right thing for you.
You’ll realise that many things that looked attractive at the beginning, after some research, are not the right thing for you.
3. Get help from an online brokerage to manage your investments.
The easiest way to invest your money is using an online brokerage or somebody who can manage your investments for you. This is an important step if you really want to invest your money.
The are many brokers you can choose, however, my top two are:
Motif Investing. If you don’t want to invest a lot of money, Motif Investing is for you. You can trade stocks and ETFs in bundles of up to 30 for as low as $9.95 (either buy or sell). Plus, you will receive up to $150 when you use Motif Investing and refer friends.
Vanguard is one of the easiest ways to invest because you can set up automatic transfers from your checking or savings account into your Vanguard account (pay yourself first).
4. Don’t let your emotions decide for you.
Now that you have your online brokerage, you are all set up.
When you are investing, you need to focus on the long-term, but the truth is that it’s not as easy as it sounds.
No one likes to lose money but money is emotional. To help you out with this feeling, you need to understand that you never actually lost any money unless you sell. Keep a cold mind and focus on the long-term goal.
5. Keep track of your portfolio.
After your first investment, you should start tracking your investment portfolio. Do it regularly and you will learn from your mistakes and successes.
Now, don’t get obsessed. You don’t need to check every single minute of the day or you will get crazy. Have a look at certain times of the day (this will help you to control your emotions) and don’t make rash desitions.
6. Reassess and Reinvest.
This is the last step in the process but it’s also the first one for your next investment.
Analysing your portfolio will help you reassess your investment and you’ll be able to figure out whether to reinvest or not. Now that you know the steps to follow in order to invest your money, the hard part is done!
It only gets easier from here.
7. Other types of investments
There are other ways to invest your money instead of using an online brokerage.
You can invest money by spending it on things that will help you make money. Some good examples are:
- Blogging – Investing in a blog can help you make extra money. Last year I made over $6,000 from blogging with an investment of less than $70 (host+domain). If you are thinking about starting your own blog, I created a tutorial-guide that will help you start your own blog for cheap, You need very little investment, starting at only $3.95 per month (this deal is only through my link) for blog hosting. Additionally, you will get a free blog domain (valued at $12-15) through my Bluehost link, only if your purchase is for at least 12 months of blog hosting. My recommendation is for you to be self-hosted. This is important if you want to monetize your blog because your website will look more professional.
- Courses – Investing your money in courses can help you make more money. After I took the course Building a Framework: The Ultimate Blogging Handbook, it only took me one week to recover the course price ($97). After one month, I made more than $500 extra.
- Plugins. If you are a blogger, investing in plugins can help you grow your blog. Since I purchased Tailwind (Pinterest pin scheduler), I’ve duplicated my page views and monthly income.
That’s all for today.
Did you enjoy the post? What investing tips would you give to somebody who wants to learn about investment? Are you already investing?