So you want to start an investment portfolio. YES!!!
Money drives the world’s economies, spending habits and saving habits. We all love to make as much as we can. Less of us love saving it. But we work long hours and part of the gratification from that hard work should be swollen accounts and balance sheets. But where are we stashing that cash when we aren’t spending it?
Where do you Stash Your Cash?
Sadly, statistics and studies show that the majority of people under the age of 45 let their excess savings sit in low and no interest bank accounts. And if you don’t think that’s tragic, I’ve given a mini-lesson in compounded growth in a different article found here. Pay attention to the table midway through the article.
If this money isn’t simply for a rainy day (short-term emergency needs), then I beg how 0.25% – 0.50% bank returns are going to help you achieve your midrange and long-term goals? Spoiler alert: they won’t.
Where Should you Stash Your Cash?
The harsh reality is that most 22-45 year old Americans (though this is also a worldwide plight) have little or no idea how and where to invest their money. Billions of dollars are left unearned by the apathy and disinterest in moving money from bank savings and checking accounts. We fear what we don’t know. The lack of investment knowledge and fear of “losing it all” keeps them from investing their wealth.
But if the Pearly Pig could wear the cape of a super hero, this is where we would put it on. Because we are here to help. The choices in investing number in the thousands and thousands and thousands. But with thirty years of investing experience, we think we have a pretty good handle for where to, and where not to put our cash.
5 Tips to Get Moving in the Right Direction
With fear in making investment decisions, too many would-be coulda woulda shouldas lose out on serious opportunities of investing and multiplying their money. Here are four things to do to get over that paralysis and to start getting comfortable with moving that stash from cash to investments. (And no. A bank savings account is not an investment. It’s cash.)
- Read a book. Or two. Want a quick primer on investing? Ben Graham’s “The Intelligent Investor” will bring you up to speed and put you ahead of the game. Take it all in, and you’ll not only be ahead of 99% of your colleagues, but you’ll also be ahead of 90% of worldwide investors. Who said knowledge doesn’t pay?
- Consult a few investment experts. It may sound “expensive” to consult a financial expert but in reality, it isn’t. If you do it right. Nearly every credible financial advisor (I haven’t heard of one) will give you the first meeting without charge. If they don’t, run. This is usually called a “discovery meeting” where you get to interview them as much as they get to “discover” your situation. Here them out. Ask them about their investment policies. How they view the markets today. What they’re doing with other clients. Ask for referrals or credentials. Ask friends and colleagues for referrals. But don’t, and I mean DON’T, sign any paperwork on your first visit. Take notes in the meetings and compare them to your findings from “The Intelligent Investor.” Trust your instincts.
- Just Get Started. Open an account at Robinhood, Stash or Acorns. Enter your checking account information – it’s as safe as it can be on the internet. Which is pretty decent these days (make sure you always read privacy policies, terms and disclosures – you’ll learn alot!) Let them start rounding up your checking account transactions. Or give them a flat dollar amount each month. Want to try all three to compare? Go for it – it won’t cost you much and you can always transfer money back to your checking account – or to a different investment account. The lesson here? Just do it.
- Check in weekly. Keep a watch and diversify your investments. All three investment accounts allow you to pick diversified investments. Start there. Diversification is great. And then check in weekly and ask yourself a few questions. Are your investments performing compared to the overall market? Do you understand how your money is invested? Do you need to do any work to feel like you could hold a discussion with a friend about what you’re doing?
- Become an Active Participant. One of the best ways to do this is to read. And read regularly. Grab a Wall Street Journal or a Barron’s Financial. Short on time or want to cover more ground quicker? Sign up for our Pearly Pig Weekly LITE Newsletter on our homepage (right side) here. Want to get real serious and dig in more? Then consider our Weekly Investor Companion here or our PRO Weekly newsletter here. Read, read, and read. Discuss what you’ve read. If you can, find someone to debate points or to discuss current topics.
It’s time to get going. And the buck stops with you. It’s not timing the market (or making perfect choices regarding your investments), but it’s time in the market (or getting started today). But you’ll learn that in the book I suggested.
Questions? Email me at firstname.lastname@example.org.