This post is written by our regular contributor, Mike.
Investing can be intimidating.
Even the word “investing” can be intimidating.
There’s no denying that the stock market is complex and that lots of people make mistakes when investing – even the most experienced investors can’t always predict what it will happen.
However, those aren’t reasons for Millennials to shy away from the stock market.
Your 20’s and 30’s are the best time to start investing – even if you never have before – because it’s time that will generate returns.
There are simple ways to begin investing right now which will minimize risks while helping you learn the ropes for investing in the future.
1) Don’t Worry About the Next Big Thing
Everyone wants to invest in the next Starbucks – we want to pick that company that’s going to be the next big thing and make us rich over night. But the best way to get started in investing is to ignore that impulse.
Instead of trying to pick a winner, invest in companies like Apple and Coca-Cola that are established and steady. Sure, over the course of one year or even five you might not make significant returns on your investment, but what Millennials need to think about is the future.
Investments grow over the long-term. Invest in companies that have turned over profit in the past and will continue doing so in the future.
2) Invest in Cross Sections
What you don’t want to do is invest all your money in one place. Unless you’re a professional financial advisor, your best bet is to invest in a cross section of businesses that are all projected to do well – or in layman’s terms, don’t put all your eggs in one basket.
This way if one of your investments turns out to be the next Enron or Borders, it’s still only a small sections of your portfolio and not enough to really harm you in the long run. Warren Buffett advises a low-cost S&P 500 index fund, which is what I personally have. It’s nothing flashy, but it’s a safe and easy way to get started investing.
3) Practice Makes Perfect
All good teachers know that games make learning easier by making it fun. If you’re looking to get into investing, don’t start by putting a large sum of money into the market only to lose it. Instead start by trying out an investment simulator; learn to play the investing game without the risk and by having fun while learning about the stock market.
By trying out one of these simulators you can get used to how the market works because they’re designed to be as real-life as possible. Build your confidence, learn through having fun, then begin investing for real when you know you’re ready for it.
4) Use Apps
Investing is one thing and staying informed about how your investments are doing is another. Statements in the mail are good, but an app like Draft is far better because it’s constantly up to date. Think of it like Mint for investing.
If you’re a frequent YAM reader you’ll know we’re big fans of this app because it not only allows you to quickly identify any under-performing assets, but it also lets you compare your portfolio to that of your peers so you can reallocate funds accordingly.
Motif Investing is another app that’s useful because it allows you to custom pick the companies you think will perform well. If you’re a beginner be sure to remember to pick steady companies rather than small ones you think might be the next big thing.
It’s useful because it allows you the freedom to choose your stocks and then choose how heavily you invest in each stock, so if you expect one company to out perform another then you can adjust the weight on it accordingly, check out this link for more on how it works.
When you’re starting out in the stock market, it’s okay to start small and minimize your risks. Like anything, your knowledge and capability in investing will grow with time – and so will your returns – as long as you’re patient and willing to learn.
Don’t be intimidated. It might be confusing at first and you’ll make some mistakes along the way, but getting started in the stock market is still a smart investment for the future.
How did you get started in the stock market? What are the things that stop you from getting started?