Investing in the Stock Market
Investing in any kind of market is usually the best way to set aside money while you are occupied with other things in life. The goal is to eventually have your money ‘work’ for you, which I am sure you’ve heard a thousand times. The endgame here is to eventually invest in multiple vehicles. Ultimately, this allows you to diversify your assets in as many baskets as possible.
Picking A Broker/Exchange
Robinhood recently announced fractional investing, automatic deposits, and more to make getting into investing very simple.
By using my referral link you will receive a free stock upon sign up that may be valued up to $1200.
Alternatively, WeBull is a new competitor to Robinhood with a slightly better referral program. If you sign up for WeBull using my link you will receive 1-3 random stocks with a value of up to $1500. However, most people only receive one stock with an average value of $10.
Link Your Bank Account
Add a bank account for deposits and withdrawals. I highly recommend using Robinhood and setting up a weekly automatic deposit. This is the best way to save money from my experience because if you are anything like me – you will spend this money on random purchases you don’t need.
Setting up a small weekly automatic investment of $20-$50 can add up quickly over time. With compound interest it has the potential to double every 7 years. $100 invested 7 years ago is worth $200 today. If you invest $50 a week for a year (52 weeks) the total amount ends up being $2600.
If you left this money alone and didn’t touch it for 7 years it will be worth roughly $5200. 7 years after that same investment? $10,400 – and for a lot of people that is enough money to close on a house. Small weekly investments go a long way, especially when it is an amount you might’ve otherwise thrown away at the gas station on snacks, booze, uber fares, fast food – you name it.
Choosing What To Invest In
It is important to invest in assets of your choice. I have provided a link to the Bogleheads investing forum at the end of this article. On this forum you can find some of the best investment advice possible. Furthermore, all of the information on that website is constantly peer reviewed by analysts and checks out accurately.
To make things easier, here are the equities that I invest in, within my portfolio:
VTI – 50% of portfolio
QQQ – 20% of portfolio
VXUS – 20% of portfolio
Miscellaneous stock picks (long shot gambles) – 10% of portfolio.
If you wanted to make your life easier, you could theoretically just invest in the same exact assets as me. I don’t plan on failing with my choices, so if you can see me being successful – just do what I do.
Making Sense of Your Investments
As you can see – my portfolio consists of
A Total Market S&P Fund (VTI) which is essentially just a basket of the top performing 500 US stocks. This is my safe bet, and it should yield an average return of 7% per year.
A heavily weighted tech fund (QQQ) which is a basket of the top 100 or so stocks in the technology sector – namely stocks like google, microsoft, amazon, facebook etc. This is considered slightly more risky but has returned 11% returns per year on average.
A Total Market International Fund (VXUS) which is a basket of the top 90% of international stocks outside of the United States. This serves as a hedge in case the international market begins to perform better than the US market like seen in history.
A small portion dedicated to investing in fun things like cryptocurrency, speculative new stocks like NKLA (a Tesla wannabe) and other penny stocks that I try to get lucky off of short term.
I recommend picking the following portfolio if you want to just set it and forget it and come back 5-10-15-20 years down the line to collect your profits. This is moderately less risky than my portfolio above.
70% VTI
30% VXUS
You can set up an automatic weekly investment on Robinhood to invest in those stocks to make things easier.
That is essentially all you need to know to get started with investing right away. However, if you want to improve your knowledge then continue reading more:
Advanced Investing Tips
The stock exchange platforms listed above are great for getting introduced to the stock market. They are especially good for “gambling” with small amounts of money – $5 here, $10 there and hoping it doubles or triples on a penny stock
Once you collect your free stocks from these platforms, I recommend cashing them out. Alternatively, you may continue to use the platforms to make your small “fun” trades with. I have since moved on from Robinhood after I learned enough about the stock market. However, I still use the platform to make up the 10% of miscellaneous assets in my portfolio.
These platforms are great for investing in penny stocks, and putting a small amount of money into speculative companies. Additionally, you can even invest in cryptocurrency on Robinhood. However, once you open up a Robinhood account you will eventually want to do more things like open a Roth IRA or HSA or even 401k with your work.
Long term investing requires much more due diligence and I recommend using either Fidelity, Vanguard or Schwab. These are the main, traditional investing platforms where you can do more than just create a brokerage account. For instance, many people invest in something called a Roth IRA. As far as investing goes, it is the exact same thing as a regular brokerage account you’d find on Robinhood. However, the key difference is that this account is tax advantaged and you can only contribute a maximum of $6000 per year.
It is recommended that you first max out your Roth IRA before investing in any other account because it is tax free. A normal account is taxed at the same rate as income which is extremely steep.
Finally, if you wish to further your knowledge then I recommend visiting our good friends over at the Bogleheads forum. I also encourage you to read the other articles that I have to offer in the blog section of my website.