ByHerCapital |July 28, 2020
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In plain and simple terms, investing is putting money down now in hopes for more money later. But why do we hear time and time again that it’s so important? Well, whether it be to pay off your student loans, save up for your older, richer self, or even for your girls’ trip to Hawaii, investing is a great way to make your money work so you don’t have to. We know it can be scary, but we are here to break it down for you, so you can be well on your way to becoming wealthy like a finance bro… without the douchey attitude.
General Strategies For Investing
Early bird gets the worm: Time in the market always beats “timing” the market. Thanks to the power of compounding, small contributions in the present will reap higher returns than larger contributions later. So start today!
Make a clear plan: Think about your budget. Are you setting aside a part of your monthly savings to invest? Take baby steps even with a small amount of money. For instance, instead of going on an impulsive online shopping spree (been there, done that), set that money aside and invest that bonus. Some apps even allow you to invest using pocket change—who wants coins jangling around in your wallet anyway?
Assess your level of risk: Depending on whether you are 18 or 60, you are going to have vastly different approaches. If your golden days are near, you are better off placing your capital in safer investments, like bonds. If you still have 50 years until retirement, gear your investments toward riskier, but high-yielding investments, like stocks. Allocate your investments according to how much risk you can tolerate.
Different Investment Vehicles
Brokerage Accounts: To buy and sell your investments, you’re going to need a broker. Luckily, opening an online brokerage account is super simple and only takes a few minutes (quicker than your skin care routine, we promise). TD Ameritrade and E*TRADE are great places to begin since they’re user-friendly with a huge wealth of resources.
Mutual Funds: Mutual funds are professionally managed investments that pool money from different investors—almost like a potluck of the finance world where you just show up with whatever the host tells you to bring. They are often one of the best investments you can make, given their low cost and risk. This is because mutual funds spread themselves across a collection of different investments, allowing you to capture the returns of different markets through just one single purchase. As such, these are great for those who want to leave the decisions up to professionals and not go through the work of buying individual stocks and bonds.
Traditional IRA: An Individual Retirement Account (IRA), as the name suggests, is an account for you to save any and all retirement money. These are open to anyone with an income (internships and part-time jobs included). You don’t have to pay tax today on the money you put into this account, which means your money can grow tax-deferred until you start taking it out—aka extra $$ for those golden years. Not to mention that many employers offer to match your IRA contributions, which means even. more. free. money. Why would you not sign up for this?!
Now that we’ve gone over the most common types of investments, let’s hone in on the big money-maker: stocks.
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Stocks
Like pieces of a pie, buying a “share” in a company entitles you to partial ownership of the company. If the company’s value increases, your investment increases too. Bigger pie, bigger slice! Stocks are awesome investments because amongst the most common securities, they reap the highest returns over the long run. Here are some tips to help you get started.
Consider how active you want to be. Some of us check Instagram every week, some of us check every hour (what else can you do during quarantine?). Similarly, ask yourself how active you want to be with your investments. If you see yourself being an active investor, that means dedicating a bit of energy each week into researching new investments and individually curating your own portfolio. If you see yourself being more passive, go with a robo-advisor, an automated investment management service that can customize a portfolio according to your goals. Betterment is one robo-advisor you can look into.
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Choosing a company.When you invest in a company, it is because you believe in their long-term growth. If you are just starting, go with the companies whose products you love, rather than the “hottest” stock at the moment. A great stock comes hand-in-hand with a strong company—think management, strategy, and financials. What is their revenue like? Are they on top of industry trends? What experience does their C-Suite have? Have they been in headlines lately for product launches? There’s quite a bit of research that can go into this, and websites like Seeking Alpha are great places to get your feet wet. But when it comes down to it, just ask yourself—would you be proud to own this company?
Don’t put all your eggs in one basket.Investing is like applying to colleges. You do not just apply to one, even if you are sure about getting in. You hedge your bets and wait for the results. Be sure to diversify and invest in different industries.
That’s all for today—thanks for reading, folks. If you have more questions or want to learn more (why would you not?!), the team at HerCapital would love to help! Comment below, check out our website here and follow us on instagram for more tools and resources @her.capital!
HerCapital’s mission is to empower women to invest in their future. Through virtual events and an online knowledge base, we hope to help women with money management all while building a community of strong women who lift each other up. Click here to check out our website and follow us on our instagram @her.capital!
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