Investing 101: How to Learn and Start Investing

Investing and Growth

Investing is the most important aspect of building wealth.

“It is through investing that one acquires assets, and through assets that one acquires wealth.”

Wealthy Whisper

Investing is something that even the uneducated can do with little money. It is the way to make money work for you so you can reap the rewards while you live a busy life.

To make it plain and simple, you need to invest your money. Whether it be 1% or 25% of your income, it all matters and adds up.

Most wealthy people have made their fortunes through investing; whether that be through stocks, business, real estate, or giving loans. The exception to this is people that have inherited their fortunes, won the lottery, or happened to be a trust fund baby. The problem is, many of these people eventually go broke, and their fortunes have come through scarce circumstances.

Many people refuse to invest because they are either scared, do not know how to, believe it will not work, or feel they lack the capital to invest. We are here to tell you that those four reasons do not matter. Investing does not have to be a scary thing. It is exhilarating and fulfilling. It does not have to be complicated either, and we are going to lay out a solid foundation for you to get started. Investing works if it is done correctly and will make you wealthier than you could ever imagine. Lastly, you can even start investing with under $10.

Why Should You Invest?

Why should you invest

In short, it makes you more money over the long-term than a savings account can offer. We have seen savings accounts between 2%-3%. However, most investments can earn anywhere from 7%-15%. Couple this return with the power of compound interest and investing becomes an easy decision.

We are not telling you to close your savings account and go all-in on investing. You should always keep a savings account as an emergency fund or to save for a big purchase. We are trying to tell you that keeping all your money in a savings account is not investing and will not be what brings you wealth. Even a savings account at 3% will not even keep up with inflation. But, that is a topic for another article. Just know, that while savings accounts are great for saving, they are doing the opposite of making you money.

The bottom line is that if you want to be financially free or even be able to comfortably retire, you MUST invest as much as you possibly can.

Simple Ways to Learn to Invest

Simple ideas to invest

Stock Simulation Account

Many free programs that will simulate stock investing.

Investopedia has one that we used in high school. The “game” will start you off with a few thousand dollars which you will use to “buy” stocks of your choice. Of course, there is no real money involved. However, the stocks will match the price of it’s “real-life” value. Therefore, you will be able to see how you would be doing in the stock market if you were investing with real money.

This is a great option for someone who knows nothing about the stock market and wants to get an understanding of how it works. Since there is no risk involved, it is a great way to learn the stock market and get a feel for investing in it.

Research

Just like reading this article, there are thousands of other articles, books, and videos on how to invest your money. If you are truly interested (which you should be), consider spending time researching and figure out which investment mechanisms pop out at you. After all, all great investors would tell you that they have done hours and hours of research and development of their processes. This article is a great start and should be one that you look back on. It will continue to update with the latest trends, teachings, and information that will benefit your investment journey.

Another great place to start is on our Books We Love page where you can find some of the best financial and investment books.

Spend a little time each day to feed your brain with financial knowledge, and it will turn your life around. You have probably heard the saying, “you are what you eat.” Well, we like to say, “your brain is what you read.”

To take it a step further, we would predict that there is a correlation with your financial situation and the amount of time you spend gaining financial knowledge. The more time you spend learning about financials, wealth building, and investing, the better you will be. With that said… Congratulations for taking the time to read this article.

Look at Portfolios of the Rich

A great way to get an idea of what the rich do is to look at their portfolios. The wealthiest stock investor is Warren Buffett. Look at his portfolio here. Warren Buffett is notoriously picky with the businesses he invests in and only invests if it makes perfect sense for him. This discipline is a strategy that everybody should use, but he is the master of it.

This does not mean that you should copy Warren Buffett and do everything that he does. He has a lot more capital than anybody to invest, gets tax breaks, and has many other factors contributing to his investment decisions. Many of his stocks he also bought at a price that you may never get the chance to see again.

But, it is important to look at his portfolio and find some common themes to get an idea of what he looks for. You will find that he does not invest in commodities and invests in companies that we would think of as almost monopolies in their market sector.

Simple Ways to Start Investing

Start investing and working

Betterment

Betterment is probably the best robo-advisor out there. This technology is software that will take control of your portfolio for you, and there are no individual investment decisions. Their fees are a minimal percentage (and just come straight from your earning), so you will earn money and not even notice their fees. They also will diversify your investments for you so that your portfolio is safe and easy to maintain.

All you have to do is open a Betterment account, set your preferences, and deposit even just $5. As the week goes on, you will be able to see the performance of your portfolio. Little by little, you can invest more and watch your earnings increase. They have numerous options for opening separate portfolios for separate things (like savings, buying a house, and retirement). Best of all, they are your virtual financial advisor and will work with you every step of the way. It does not get easier than this.

Betterment is perfect for beginning investors that do not want to spend the time managing all their investments and don’t know what to do. We use Betterment and deposit funds weekly to diversify all of our investment platforms and have our money in a proven place for return. Betterment has an average return on investment of around 7% (and that is being conservative) which is much better than any savings account can offer.

Robinhood

Thinking of opening an investment account with Vanguard, Fidelity, or E-Trade? Don’t do it. Open a Robinhood account, and you will end up saving hundreds if not thousands of dollars on commission fees. The online broker is 100% free to use to buy and sell stocks. Not only that, but they give you a free stock just for signing up that could be worth hundreds of dollars.

This is not only the best place to open your first stock trading account, but it is the best place to have one in general. Open your account, deposit a little money, do your research, and buy any stock of your choice. The program makes buying and selling stocks easy and gives you as much information as you could need in the process.

It is always exciting to wake up after you have purchased a few stocks and open the app to see how your stocks are doing. This platform is perfect for everybody. Whether you are a beginner or know what you are doing, you cannot beat commission-free trading. We used Robinhood back in high school to learn how to buy and sell stocks, and we still use it to this day.

Acorns

Acorns is one of the first platforms we invested in. Since 2014 we have seen a 17% return on investment! Acorns is similar to Betterment in that it is a robo-advisor, however, we feel that there is more customization to it and the fees end up being a little less.

Acorns connects your debit and credit cards and monitors any transaction you make. It takes any purchase amount and rounds it up to the next dollar. That spare change is put into your acorns account.

Acorns is one of the best ways to save automatically. You will honestly forget about it, come back, and find that your account has not only grown but is making a solid return on investment. It is a perfect tool for both beginning and experienced investors.

Fundrise

Fundrise is the perfect platform for anyone that wants to get started in real estate investing. It is a real estate robo-advisor and will manage your real estate portfolio. It is a portfolio compiled of REITs (real estate investment trusts) which are companies that invest in real estate projects. The app and website shows which real estate projects you have invested in, continue to reinvest your dividends and allocate your funds toward new projects. It is the perfect platform for any beginner that wants to get involved in the real estate market (one of the best investment mechanisms).

The biggest problem with Fundrise is that there is a $500 minimum to get started. Many people do not have $500 laying around to invest, but it is worth the savings. We used our tax refund to fund our first account, and it has already paid off. It is well worth the investment if you can find time to save $500 to start an account. As your portfolio’s funds increase, the perks increase and Fundrise will reward you with even better portfolio management. The fees are minimal and end up being only a few cents per month which is nothing compared to the return you will be earning.

Fundrise has an average return on investment of around 11% which is a significant upgrade from Betterment and a whole lot better than any savings account you can find. If you can afford it or have the will to save for it, Fundrise is a no brainer.

Lending Club

Lending Club is a platform that allows you to be your own bank. You use your money (a minimum of $25) to fund loans to other people which they will pay back with interest. There are different levels of risk with different loans that explained to you through the investment process. You can even choose which loans to invest in and at what interest rate. Interest rates can vary from what we have seen to be anywhere between 4%-20% depending on the level of risk you are willing to take if people do not pay back their loan. This return on investment is why we recommend diversifying.

These loans can take up to five years to be paid back in full, but you will earn payment every month. Once the loan is completely paid off, you will see that you have a lot more money than the $25 you invested in the first place. Every time we have at least $25 in our Lending Club account, we reinvest it in a different loan. This process causes a snowball effect in which we can invest in a new loan on a quicker and quicker basis. Once your account is big enough, you will find yourself investing in multiple loans each month. With enough investment, you will find yourself with a whole new stream of income.

Roth IRA

The number one retirement account that every person should invest in is a Roth IRA. A Roth IRA uses already taxed income and puts it into an account to invest in stocks, indexes, bonds, etc. The best part about a Roth IRA is that when you retire, you can withdraw money without being taxed on it or your profits.

Opening a Roth IRA is as easy as opening a bank account. We use Ally Bank for our Roth IRA as it has very low commission fees and reliable customer support. Most banks will offer a Roth IRA if you look into it.

Setting aside a few dollars a month for retirement is always a good idea. You get to choose what your investments are in a Roth IRA, and your funds are not taxed when you retire. There is nothing not love about this retirement account, and it is by far the best retirement account to open.

401(k)

Probably the easiest way to invest is by signing up for a 401(k) if your employer offers it. Investing in a 401(k) can come out of your paycheck each month, gains interest, and most employers will even match some of the money that you put into it. That is free extra money. On top of that, a 401(k) uses pre-taxed dollars which means that it will lower the amount of tax you are paying on your paycheck and earn money at the same time.

If you can afford it, the best thing to do would be to ask your employer about the max you can put into your 401(k) and max it out. With compound interest, you will end up with a large sum of money by the time you retire and may be able to retire early. One of the best parts, it is all automatic. You do not have to do anything, and you are on your way to being ready for retirement.

Conclusion

Investing is the most important part of building wealth and becoming financially free. By acquiring assets, you raise your net worth and add an extra income source in the process. The only thing that you have to do is get started! Don’t wait until you are “ready,” or until you can “afford it.” You can start with under $10. Take two days off from buying Starbucks, make your coffee, and you now have an extra $10 to invest in yourself. There is no excuse not to invest unless you want to work for the rest of your life living paycheck to paycheck. Investing is the only way to get ahead and make sure that you are in control of your financial future. Start Today!

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Jakob Freele

Wealthy Whisper is written by MBA students that are passionate about wealth building, personal finance, investing, and becoming financially free. Everything we learn will be written about on Wealthy Whisper and our goal is to help people with one of the most important aspects of their life... finances.

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