Investing Roadmap for Beginners

 

 

 

Among my circle of friends, I am the go-to when it comes to questions and suggestions concerning household finances.

 

I have been asked for a simple yet direct investment roadmap for a beginner.

 

I’m not the best at explaining, but I will give it a shot!

 

  1. Set a Goal: Decide WHY you want to invest. Sure “I want to make money” is a good one, but you need to understand that investing, especially for beginners is a long term thing. It’s not a get rich quick scheme. So setting a goal for long term savings, retirement, etc is just a good practice.

  2. Find an online broker: The broker is who you will buy the stock from. Most banks have an in-house broker under them, so I find it easier to go that route just so you can easily transfer money from your checking or savings account into your brokerage account.

    1. For Example: Bank of America is connected to Merrill Lynch, so that’s who I use. I’ll post a couple of links that allow you to open an investment account.

    2. https://www.merrilledge.com/investing/online-brokerage-account

    3. https://www.scottrade.com/

    4. https://www.tdameritrade.com/account-types/faqs-opening.page

  3. Fund your brokerage account: This is where you transfer the money you want to invest, into your account so you can purchase a stock/fund

  4. *DECIDE WHAT YOU WANT TO BUY* OK so this is where I have to say, I AM NOT A LICENSED FINANCIAL ADVISOR I’M JUST A GUY GIVING ADVICE ETC ETC

    1. Now that that’s out the way, I know you probably hear a lot of “stock talk”. People saying buy this stock, buy that stock, etc etc. My PERSONAL ADVICE is DO NOT CHASE INDIVIDUAL STOCKS UNTIL YOU ARE A MORE SEASONED INVESTOR WITH MONEY YOU CAN AFFORD TO LOSE!

 

With that being said, I know there are thousands of Americans with just savings accounts, giving you a return of 1%, if that. My suggestion is a simple.

 

So simple, it’s probably boring. But, invest in the S&P 500 and call it a day.

 

Why? Well that’s easy. 

 

Simply put, 10% >1%.

 

To give you an example of the difference 9% can make over a 20 year period let me toss out this scenario:

 

Scenario A) You start with $2,500, invest $250/month for 20 years into your savings account that get you 1% a year. In 20 years you have about $70,000

 

Scenario B) You start with $2,500, invest $250/month for 20 years into your S&P fund that gets you 10% a year. In 20 years you now have $188,000, a difference of over $100K!

 

 

  1. This Forbes article will lay out why in more detail and even suggest a couple of S&P 500 Funds. https://www.forbes.com/sites/michaelfoster/2017/01/29/one-simple-trick-to-double-your-retirement-income/#529fb05a4eb9

  2. The 2 S&P funds I would recommend are VOO and SWPPX. If you want a slight step up from a standard S&P fund, with a slightly higher risk, but a higher reward as well, check out TRBCX.

 

And that’s it folks. Just steady, consistent, monthly investing into your investment account will make a difference. Resist the urge to go chasing the hot stock, because you heard a lot of people talk about it. Slow and steady will make a huge difference in your financial situation.

 

Sorry for the length, but I hope that helps get you started on the road to investing.

 

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