Investing Your First Dollar

July 20, 2015

“Do Something Today That Your Future Self Will Thank You For.”

So you finally have a bit of money and you have decided to take control of your financial life. Good for you! You realize it is time to begin investing, and you are willing to think about the long term — weeks, months and years — and not just today. You are willing to be patient. And you want to take steps now to benefit your future self.

Let’s say you have $10,000 available to invest. But investing is new to you and you are not exactly sure what first step to take. It can be intimidating to think about making decisions about the entire $10,000.

Before you do anything else, here is a practicaway to get started. It’s called “building an investment portfolio” and basically it is a plan for how you will invest your first dollar (and each subsequent dollar).

You might decide to set some rules for yourself that look like this:

  1. Invest no more than 8% of the total into any one stock (N.B. could also be an index fund). This means a maximum of $800 in each company.
  2. You now know you have $800 to invest into any one company. Decide that you will buy shares of any company on two separate occasions: first purchase for $400 worth of stock and later, purchase another $400 worth of stock (these can be at different prices).
  3. Eventually you have will 12–13 stocks in total as your portfolio — each with about $800 invested.
  4. Buy companies in at least 5 different industries. As an example, you would not put all of your money into oil companies — spread your purchases around. Diversification is key.
  5. Don’t be afraid to hold cash — be patient for opportunities to arise. Your plan might look as simple as this, and basically you check off each investment as you go.
  6. Now you have a plan, and instead of thinking about investing your all-important $10,000, you are looking for your first investment for $400. And then the next for $400, and then the next, etc.

And that gives you an investing outline that your future self will thank you for.

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Originally published at blog.instavest.com.