Everyone Can Invest
The leading reason for blue or white-collar workers not investing is the perceived lack of cash to start. This is a misconception that everyone should shake out of their minds. It does not take thousands of dollars to begin investing. With the abundance of securities offered these days, there is an investment option for everyone, no matter the level of capital.
It does not matter if you have $50, $100 or $1,000, you can kick off your investment journey now. There are several brokerage firms who require a minimum deposit, but there are also a few who have eliminated a minimum deposit purely to welcome those investors interested in starting, that may be low on initial cash. So, there is no excuse for not being able to open an investment account. All it takes is an initial investment at some point to eventually evolve into a large value later.
If it is nerves holding you back, then let’s get over them. At some point those fears have to become conquered. Accumulating a strong net worth is not done from saving money solely, it is accomplished from making smart investments throughout your lifetime. There are absolutely risks involved with investing, but there is also inflation expected to hurt your savings account. Leaving all your cash in your bank account will experience devaluation over the years as its worth slowly decreases. Take that into consideration. There is two options: strive for investment success or remain comfortable with mediocre savings account interest payments.
Do you have an employee sponsored plan, a pension, or a 401(K)? All three of these are common investment tools used for employers to assist their employees in building a retirement fund. The main source of investment vehicles in these plans are stocks. If you have one of the three investment plans, then clearly you are investing in your future. If you happen to not have any of the opportunities, then you should now be aware of their purpose – to invest your money while you are still employed to create a strong cash pot in retirement. This is the leading method for workers having a reasonable savings cushion in retirement and the driving force is the stock market.
Lose the fear and start building your retirement fund. In the financial world, a major player to achieving success is the desire and wants to have success. Once you make the decision to start investing, then by default you have already succeeded. It does not take master intelligence, it more so takes the willingness to put in the effort and stay confident your hard-earned money will grow with smart decisions.
To begin, take either $100 or $1,000, whichever is available, and set it aside for the opportunity to come. Finding the right investment is more important than simply adding money to an account just to be in the game. Once you have set the initial amount to the side, do not touch it or minimize it.
For simplicity and a broad market index investment, the most likely conservative investment will be the S&P 500 Index. The S&P 500 is a market index that tracks the performance of 500 of the most notable U.S. companies on the stock market. Since it is nearly impossible to replicate all 500 companies in one individual’s portfolio, financial institutions have taken on that hurdle for us, by the way of exchange traded funds (ETF). A great option for the everyday investor to start off with is the SPDR S&P 500 ETF (Symbol: SPY). This ETF has performed well for investors since its inception in 1993. Over the past 3 years it has returned an average above 10% and 13% over the past 5 years.
The method would be to make an initial purchase of the SPY ETF with the funds you have already set aside. Acquire as many shares as possible with the entry purchase amount. This is the easy part in the process. This investment will give you a piece in the overall market as a conservative plan. It is not too risky, not too stagnant, but it is a passive investment move that will experience gradual growth over the years.
Once the entry investment is made, all you will need to do is continue to contribute or add funding to fuel the position over time. Frequent contributions are an easy way to accumulate a significant stake. As recurring additions are taking place, it may not seem like the account is becoming much, but give it time; the art of compounding will turn the initial investment into its own self-sufficient player in a larger portfolio.
Charting progress is made easy with the technology of online brokerage firms. It will be easy to view how well your investments are performing over time. The tools are rather simple to understand as graphs and tables will show current balances, time charts depicting the change in value, and some will even show your return on investment.
The return on investment rate is the crucial part, not simply the dollar increase. The return is expressed as a percentage, so gauging the level of return rate shows how well the investment performed. Earning $100 on an investment of $1,000 is a decent return at a 10% rate. However, $100 is minimal in the eyes of long-term gains, while understanding 10% is significant.
See it as the possibility of reeling in a 10% return on that type of investment in the future. Say a future investment is $20,000. After holding onto it for 2 years, you decide to sell it for a 10% return. Your profit on this investment would be $2,000. The initial scenario of $100 appeared decent, but understanding a 10% possible return opens up the limit of any investment return.
Paying close attention to the return rate helps to analyze which investments should get the heavy dose of your time. Strong rates will always bring in a good profit, but remembering the higher the initial investment, the higher the return rate will distribute. This allows investors to narrow down the focus areas for which assets they are more skilled at.
This does not have to be your only investment move, but it is certainly a great place to start with. It might be a smart move to hold on to this initial position with the S&P 500 as it will mirror the performance of the overall market. When the economy is in a strong state, the overall stock market generally moves in the same positive direction.
Remove the fears and excuses because everyone has the ability to invest in some capacity. It may not be a significant amount at the start, but that is the beauty of the process. You will see how something small will evolve into a major component of your financial wellbeing and independence.
This post is an opinionated piece (not advice) providing the everyday worker a simple path to getting started investing, in the event they are having doubts about how to get this process going.