Ready to Start Investing...Now What?
So for the past few weeks, we have been looking at various investment strategies, opportunities and methods for investment purposes.
Not to sound cheesy but “there’s no time like the present” so this week, I will be looking at steps you can take to open an investment account and get started!
Step 1: Debunking the myth of one size fits all
See, one of the reasons I’m not a fan of typical financial advisory services is their generic approach. I find the financial industry has changed so much in the past few years and gone towards an approach that doesn’t really cater to the needs & interests of different clients. For example, If I were to walk in for an appointment – I would most likely be recommended to invest in some sort of risky ETF or mutual fund because the younger you are – the riskier you can be. But what if I’m risk averse, then what? There’s no law saying you need to do x,y and z at this time to be successful financially speaking – the key is to invest in products you know and feel comfortable with – no matter what they are.
Step 2: Figuring out your risk level:
Another tip when you start investing is figuring out your risk level. Is it low, medium or high?
Notice the different levels of risk and the correlated rates of return. The saying of risk vs reward does hold true but the potential for losses is also higher. Risk comes down to personal preferences but even though financial institutions have preached age related risk levels –go with what you feel comfortable with. At the end of the day it won’t be your advisor with your portfolio but you! If you’re able to establish your risk level it helps in terms of guiding you towards products and industries that suit your taste.
Step 3: Debunking the myth of Going Big or Going Home
One thing I must stress is the fact that to be financially successful does not mean you need to pour in huge amounts of money to get a good rate of return. Starting off even contributing 1$ a day can lead to a sizeable portfolio. The key here is start off small and as your income rises so can your contributions. You don’t need to start by depositing huge sums every month. I myself started with 20$ every 2 weeks.
Saving a 1$ a day at 5% for 40 years gets you 46K with 32K in Interest
IF we bump that up to 5$/day we get 232k at the end
If we bump that up to 25$/day we get 1million in 40 years.
*All these figures assume we start with zero dollars.
Step 5: Get Started:
It’s great to read and research but once you experience the concept of compound interest and getting returns on your investments – you will quickly realize the power of these metrics and how they can help fuel your future financial growth. Investing is a 2 step activity the first step is researching and the second step is doing.
Step 6: What Account do I open
There are many places where you can open your first brokerage account. If you want to purchase stocks most of the big banks and discount brokerage firms will offer accounts. Mutual funds are generally easier to open and you can get started with them very quickly. Although big banks will be simpler to go through –their commission will be higher for trades.
Pro-Tip: watch out for transaction fees
Remember that investments are not an overnight strategy to riches – it takes time to reap the benefits of dividends and compound interest and the longer your money is active the more you will make in the long run. Having said that try avoiding so many transactions (there are only some situations that warrant selling an investment). Transaction fees can rack up without you knowing it and 4.95$ a trade may not seem much but if you’re trading every other day it will set you back.
Disclaimer: All of the above information is my own personal opinion. I am not receiving compensation from any of the companies listed above. Please do your research before making any investment/financial decision. Please consult with a licensed financial representative before making any financial decision.
Thumbnail Image: http://www.theglobeandmail.com/report-on-business/video/video-carrick-talks-money-the-im-ready-to-start-investing-portfolio/article16067975/