Investing 101: A beginners Guide.

When you first start investing, it can be a scary experience. You are putting your money into something that can go to 0. You can also get a good pick that goes to 100x.

Now these of course can be extreme circumstances and most cases you get a 7–8% yearly return after inflation is calculated in. Nominally you get about 11%.

But if you are a beginner to investing your money in your future, you have come to the perfect guide for your investing needs. We will be exploring these simple topics in these guides.

• Understand that being early counts
• How compound interest works
• Finding the right brokerage for you
• Finding the right account for you
• Finding the right fund or assets for your accounts.
• Developing your investing strategy
• Don’t panic if you are losing your money.

Understand that being early counts-

There are so many personal finance gurus who will say, it’s not about timing the market, but time in the market. If you were born in the 70s and started investing at 20, you would start investing in 1990. The S&P 500 rose from 334.63 to today’s 3280.14 (A 10x increase)

If you started in 2000, you went from 1427.22 to 3280.14 (a 2.3x increase)

The growth that you can make by being in the early adopter stage of most things can be really rewarding but when you are early in the large companies, you gain the huge advantage of being years ahead of your peers.

Starting your investing early also gives you time to make mistakes before they are too harmful to your financial situation. If you make a bad investment at 25 years old, you have upwards to 40–50 more years to make up for the hiccups of an investment you made at 25.

The benefits of getting your feet wet in investing early far outweigh the missed nights of cocktails with your friends. We only live one life and its best we set ourselves up to not feel financial pains in our lives.

How Compound interest works-

When you do get started early, and gain dividends on your investments, those dividends can go to purchase more shares of the assets you own. Which will earn you even more dividends.

This concept goes hand in hand with bank interest you can get at your bank.

If you put $100 into an account with 5% interest. You have $105 after one cycle, you would have $110.25 your second cycle, earning 5% on the $105 and not the $100.

The best way to look at Compound Interest is your money makes you more money, and that more money makes you even more money.

Find the best brokerage for you-

When searching for a brokerage you want to find a good user/customer experience. Having a nightmare of navigation of the system or bad experience of working with the brokers who manage your funds will be not only annoying but will be a hassle to worry about.

There are various online brokerages you can choose from as well but a list of popular ones will be listed here, you can also read out reviews on the ones linked below and if you do decide to use them, consider using the affiliated links, at no charge to you I will receive a small commission to help keep my blogging efforts running.

• Fidelity investments
• TD Ameritrade
• E Trade
• Wealthfront
• Betterment
• Acorns
• Webull
• Robinhood
• M1 Finance
• Stash
• Vanguard
• Ellevest

Find the right account for you-

There are a few different investing accounts you can use when you start investing. Each has their own benefits and drawbacks perhaps.

401k. — a 401k is a retirement account that is typically employee sponsored and has tax qualified investment options. Workers can make contributions to their 401k that their employers will typically match funds. The way to fund your 401k is by withdrawals from your paycheck pretax. This means that you will be taxed on your withdrawals.

Roth 401k- this account is almost exactly the same, rather you can withdraw your funds tax-free. Funding this account is capped by a yearly contribution limit. This account plan is best for those who believe they will be in a higher tax bracket in retirement.

Note- the 401k is funded with pretax money from your paycheck, then taxed when you withdraw the funds in retirement, the Roth 401k is funded with after tax money from your paycheck, then you withdraw the funds tax free in retirement. This means the IRS deals with you now or later. It is best to speak with a financial planner if you have questions on your retirement tax situation.

Individual account- This is a basic investing account. Something like this will be what most uninformed investors do. When most people talk about their Robinhood taxable accounts this is what they are talking about. You are taxed on dividends and capital gains by the years law. Dividends are taxed often at your income level and Capital Gains are taxed at various levels and when you take profits.

Roth IRA- (this is my favorite) This is a retirement account that is not employee sponsored. We know the 401ks are employee sponsored and have tax advantages but withdrawal requirements come with them. Individual accounts have no tax advantages but you can withdraw funds whenever you like. With the Roth IRA it is tax advantaged, with elements of individual accounts. You use after tax dollars, no matter funds coming from, (could be a tax refund). There are also contribution limits.

Note on accounts- be sure to fully research all account options before opening your investment account. This will help you make a better informed decision.

Find the right fund or asset for you.

This is where you really get into the investing part, we started by having mindset, information, and preparation, now it’s time to actually start investing.

Most top investors will stick to just a general fund that tracks the S&P 500 while some investors enjoy diversification of various funds offered by brokerages.

For example there are 2040 moderate funds that bundle various ETFs that match expert funds. You can find various funds and bundles like these in your chosen brokerage.

You can also choose to purchase your own assets in the form of company stocks. Some people will purchase stocks such as Tesla, Coca Cola, or Amazon.

This process is completely to your own preferences and can be set to your personal investing needs.

Develop your investing strategy-

When choosing your investing strategy, you are looking to setup a goal to conduct your investing. This can be dollar cost averaging or analysis to buy low sell high. When developing his strategy you should keep in mind your investing goals. If you are looking to build wealth over the long term, the best strategy that most CFPs and financial experts will agree with.

When building your strategy, look at your goals, and work backwards. You want to reach long term wealth with low tax costs? Most advisors might say dollar cost average in a tax preferred retirement account.

Don’t panic if you lose money.

This is the biggest and most valuable advice I have ever been given. If you lose a huge dip in your investment. You should wait, most of the time its price corrections. Erin Lowry of Broke Millennial talks more about this in her book ‘A millennials guide to investing’

Most times your investment is going through a correction or maybe the entire market may be falling due to a common recession, this can happen. Do not panic, this is in fact the best time to buy more shares. If the shares of stock go to low prices, they are great to buy cheap shares that will likely rise in the future.

If this guide has helped you with investing, please consider sharing this with your friends and family. And if you are looking to get started, be sure to check out the affiliate products, this will of course give me a small commission for referring to my readers.