Before you can start buying stocks, you need to open a brokerage account. For some, that concept may sound foreign or complex – but it’s not and today I am going to discuss how to get started. There are two core ways to invest your money: self-directed or managed. When I say self-directed, I mean that you have 100% control over your brokerage account. You choose the stocks/bonds/etc. to invest in yourself. Managed money is when you have a professional broker or robo-advisor choose your investments for you. Your investment portfolio becomes hands-off. We’ll talk about managed money and robo-advisors more in a future article. Continue reading
In my emergency fund article last week, I referenced the greek phrase know thyself mostly in context. Well to expand our conception of Greek philosophical sayings, I now declare that to truly know thyself you must also know thy finances. Luckily we are living in 2016 and understanding your financial position has never been easier. You don’t need to be an accountant or financial advisor to understand the basics of where you are at financially. And that’s a good thing because understanding your finances is absolutely necessary to budget, save, and spend your money appropriately.
Before you can start investing for retirement or passive income, you must have a solid emergency fund that can keep you safe in difficult times. Though it may seem difficult to save for, remember that building an emergency fund is something you only have to do once in your life. Once it’s there, you can basically just leave it alone and focus on building wealth. Continue reading
As we start our discussion about stocks, I want to begin by saying that most people should not be investing in individual stocks. Beating the market is ultimately a fool’s game. Not even most hedge funds can beat the market after fees. Take a look at Warren Buffet’s million dollar bet that over ten years he could outperform a “high-powered hedge fund” team by simply investing in a market fund (VFINX, a Vanguard mutual fund that tracks the S&P 500). The bet is almost over and his investment is up 65.7% compared to 21.9% for the hedge fund folks. That’s a single instance, sure, but the large majority of regular investors lose to the market and that’s the truth.
So if individual stock investing is a fool’s game, why would anyone do it? Well after you secure the funds you need for your future in well-diversified market-tracking investments (more on that in a future article), investing in individual stocks can be a great “game” with your excess savings. If you’re young, that game may end up paying well if you happen to buy into the next Amazon or Apple. And just like any game, if you spend time practicing, you may get good at it! And then, perhaps, you can count yourself in the small minority of market-beaters.
Onto valuation. Continue reading