I was at a family party this weekend. Usually the conversation revolves around personal matters, relationship advice, or some harmless political banter. This time around, there was a LOT of talk about investing and more specifically, "Buying Stocks".
I was asked about 5 times how to buy stock. Some asked for instruction on how to buy specific stocks like Apple (AAPL) or Amazon (AMZN), but others just wanted to know if it was a good time to invest in general and how to get started. I thought that if these questions were being asked in my closest circle, then they are probably being asked by many others. So if you are interested in investing, here is a step by step process on how to get started. This assumes that you are investing money that you will not need for 10 years or more, this is the guide to long-term investing that will put you on the path to building wealth.
In order to buy and sell stock you will need a "Brokerage Account". This will connect you to the market through a "Stock Broker". Back in the day these Stock Brokers used to be real people that you had to call, nowadays they are online accounts and are very similar to buying things on Amazon. (Except these purchases will MAKE you money!)
The best broker for new investors is Robinhood. (Click here to visit their site) Robinhood is FREE, it is EASY to use, and it is completely trustworthy. Over 5 million Americans use Robinhood, and I am one of them!
You will need to sign up with them to be able to buy and sell stocks. When you are registering, they will ask you for very personal information. This is safe and is a regular practice in the brokerage industry to make sure that YOU are the person buying and selling stocks in the account. These are financial assets so it is very important that they know who is doing what.
After you open your account, you will need a plan. If you go into the stock market without a plan, it will make one for you and you won't like it. A plan could look like this:
"Open a Robinhood Account and fund it with $1,000, then I will be able to contribute $50 every Friday for the next 10 years to buy shares in high quality, time tested businesses."
The stock market averages 7% returns per year so I use that as my assumption. If you want to be more conservative, use 5%. If you want to be more aggressive, use 9%. At 7%, that $50 per week will bring you to an account value of over $40,000 at the end of the 10 years and over $250,000 if you do it for 30 years) Use THIS CALCULATOR to make a plan that works for you!
Now that you have your own money plan and are comfortable with it, it is time to pick your investments. This is usually the most taunting part for people because they just don't know what to buy. In the Robinhood app, there is a little search bar at the top right hand corner of the screen. Search for the stock ticker "VOO". This is the Vanguard S&P 500 ETF. Let me break that down:
Vanguard: The world's largest money manager. They are the driving force in long-term investing and make it easy and affordable for everyone.
S&P 500: The 500 largest publicly traded U.S. based companies. This includes well known businesses like Apple, Exonn Mobil, JP Morgan Chase, Google, Johnson & Johnson, United Health, and 494 others. These are the safest stock investments in the world individually, by buying "VOO" you will be getting all of them in one package. These companies range from technology, to healthcare, to financials. If you are interested in learning more, Click Here for a list of ALL of the S&P 500 businesses.
ETF: An Exhange Traded Fund (ETF) is a basket or package of many stocks all in one investment. Unless you have hundreds of thousands of dollars to invest, buying an ETF is the mose efficient way to get all of the world's best businesses in your portfolio. This convenience will cost you .05% of your investment money per year in the case of "VOO". This is the best deal you will find. Some money managers take up to 1% of your money per year to do the same exact thing. That is like paying 20x for a gallon of milk at the store, even if it is the exact same quality milk. It does not make sense at the grocery store and it definitely doesn't make sense in your investment portfolio. Keep costs down by buying low cost stock ETFs like "VOO", you will not be giving up ANY of the upside of the stock market at all.
This Vanguard ETF is a great long-term investment, but there are thousands of ETFs on the market. If you are interested in doing more research into ETFs for yourself, check out ETFDB.com
Reading this is pointless unless you actually do something. Take action and live by your plan. Continue to contribute to your investments, especially when times seem bad. (Hint: That is the BEST time to buy.) Do not ever invest money that you will need in the short-term, because the value of the stock market can and will go down in the short-term. But over time, as the economy grows and these businesses take part in that growth, the stock market will go up. If you continually invest for the long-term, you will be very, very wealthy. To recap:
1) Open your Robinhood Account
2) Make a plan to buy high quality businesses that you will hold for a long time (Through VOO)
3) Actually do it
Please share this link with anyone you think needs a push into the investing world! If you have any questions AT ALL, reach out and I will do my best to help you get on track.
If you thought this was helpful, terrible, or somewhere in the middle, please leave me feedback in the form of a Direct Message on instagram @MakeDollarsAndSense, or feel free to send me an e-mail/text to the information on my Home Page. I truly appreciate constructive criticism and opposing views, so bring em on!
P.S. New blog posts coming your way every Monday!
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