If you are even slightly serious about attaining financial independence (which I hope you are!), you must learn how to invest money. There is no way around it. Work alone isn’t going to cut it. You need to leverage the power of the capital markets in order to achieve your financial goals.
Unfortunately, too many people know too little about basic finance and investing, which is a big problem, for obvious reasons. Not knowing how to invest your money is a serious limitation in life. Whether you are new to investing or whether you are scared of putting your own money at risk, this article here will help you get a good, safe start in the investment world in order for you to attain your financial goals, long-term.
I have repeatedly said in my articles and books that financial illiteracy is a HUGE issue in our society. More than half of Americans don’t have any retirement savings at all, and way too many people live from paycheck to paycheck. While having a great work attitude is certainly great and will get you far in life, the really smart thing to do is to let your money do the work for you!
Lots of people, in my opinion, have a problem with this idea. They think that investing is too difficult, too complex, or only for rich people. This is all wrong, and these are just excuses serving as ego defense mechanisms. Everybody can learn about investing, and it is not that difficult to do, really.
Investing money (and reinvesting investment returns) is key to achieving financial financial freedom, it doesn’t matter what your current job or financial situation is. The (inconvenient) truth of the matter is that achieving financial freedom requires nothing more but dedication, self-discipline and perseverance. The rest you can learn.
If you care about financial freedom or early retirement at all, you need to start to invest your own money. This may sound scary at first, especially if you have never done anything of the sort, but there is no reason to freak out. Investing is easy…though it sounds complicated at the beginning, once you get the knack of certain concepts, you actively raise your financial IQ.
With that being said, here are 4 easy steps for you to get started to invest your own money and, hopefully, reach financial independence sooner rather than later:
1. Baby Steps
You don’t have to take any action at the beginning at all.
All I need you to do is pick up a business magazine such as the Economist, Forbes or Bloomberg Business Week and start reading it. That’s it!
The objective for you should be to learn about basic financial and economic concepts, such as why do interest rates rise, why do stocks go up and down, how does the level of interest rates in an economy affect a country’s currency, and why did company A decide to buy out company B.
The point is to get you started and thinking about financial matters and investments. The more you read, the more you learn.
2. Start Generating Your Own Ideas
Once you start reading business and financial news, you will come up with your own investment ideas.
Did you just read about a major oil price collapse? Maybe it is a good time to buy ExxonMobil. Did you read an article about an approaching U.S. recession? Maybe it is time to buy more defensive stocks in the healthcare industry. Did you read about Apple buying a streaming service? Maybe it will boost Apple’s revenues and earnings even more.
1. What Products Do You Like?
This is one of the best pieces of investment advice I have ever received: “Buy stocks of companies whose products you like and use.”
Look at your own life and see what products you enjoy. If you enjoy Apple’s iPhones, there is probably a reason for it. Yes, they are awesome! Instead of flipping through business magazines and investment articles on the internet in order to read about other people’s investment ideas, why not take a step back and think about all the products you already like to use. What companies produce those products? Can you buy stock in those companies?
2. Utilize Mock Portfolios To Get A Feel For Investing
You can buy stocks on paper just for fun without risking any of your money. You can run so-called mock portfolios with various brokers and investment sites that allow you to buy and sell stocks in real time purely for demonstration/training purposes. You are not actually buying stocks, but it is a great learning experience, and I really recommend it.
Utilizing a mock portfolio is a great way to learn about investing. It is safe, doesn’t cost you anything, and greatly reduces your emotional costs in case something goes wrong. Use it!
Getting started in investing money isn’t really all that difficult. If you don’t know where to start, just open up a business magazine such as Forbes and read about different companies and investments. Investment ideas will ultimately come to you. Look around your own life what products you like and enjoy. Is there an investment thesis?
I highly recommend utilizing mock portfolios for beginner investors to get a “feel” about investing before risking your own money. And, most importantly, once you start investing, keep your emotions in check.