Lately I've been getting a lot of questions from folks about how to start investing if I had $25k, $10k, or $100 a month. The answer is the same every time.
First thing's first. This isn't financial advice. This is how I invest. Investment is a risk. Pursue it at your own discretion and understand that anything you're willing to wager, you must be first willing to lose. With the market as crazy as it is lately, there's a lot of room for aggressive betting and as a result, aggressive losses.
So to make sure you aren't just throwing money down the drain here's what you need to know:
Pay off ALL your debts first. The average investor makes 10% returns a year. If you've playing with $100 a month, it makes more sense to simply pay down your more aggressive loans first as your investments will NOT outstrip the accrued interest from a credit card.
Build up savings of at least 6 months. If things go sideways, you want to have plenty of runway. Homelessness isn't a joke. I don't want that for you. Be safe.
Once these steps are resolved, contribute as much as you can to your 401k - esp if your employer is matching. Max out the match rate. You immediately double your investment. Everyone wins, except maybe your employer.
ROTH IRA - set one up. Contribute the maximum each year. Right now it's $6k. Money inside this account you can't touch until you're 59. The advantage here is that this asset is super malleable. Since you won't be taxed for selling like you would be on any other account, you can use this to sandbox more risky plays or day trade while minimizing risk while you figure out your investment strategy.
Dollar cost average. That is, contribute the same amount of money every week to your accounts. This has proven to be the most reliable way of seeing returns vs. trying to buy low and sell high. No one can predict how the market will move, the more you try, the more you stand to lose or miss out on big sudden gain spikes.
Invest INDEX Funds until you understand the market and how it behaves according to world events, announcements, tweets from influential people, and news. Observe the trends in how people behave. Begin to capitalize on these trends to earn more returns on your investments. Finally some general ideas that I tend to follow:
Traditionally a good investor will spot and invest in an undervalued asset - one that is overlooked, unappreciated, and poised to grow or dominate. If you have a lot of capital lying around it makes sense to invest in a stock you believe heavily in, every time the market dips. So when it invariably self corrects a few days, weeks, or months later - you get a larger percentage gain.
Most name brand companies will only turn you profit in the long run. If you don't bury your head in the sand and ignore the signs, in general if you leave your cash parked in a pillar of the economy you will see gains over a 5 year investment. You're also incentivized by the government to hang onto stocks for at least a year - if you do that before selling, you get taxed less.
If you're just starting out, it makes a lot more sense to play the long game than gamble on options. Log in, do your research, observe how the market moves, and when you understand it more fully, then begin to make bigger plays.
I typically don't risk more than 10% of my assets on any venture, no matter how *guaranteed* the results are. Again, do not ever play with more chips than you can afford to lose. Once you've accrued more principle, you'll have more room to make dumb meme bets like me.
