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One of the biggest myths is that investing is just for the rich.
Yes, you need money to start investing. But you probably need way less than you think.
What’s more important than having a big bag of cash when investing? Treat investing like a skill. Ask questions, find the answers, and practice. The sooner you start putting in the time to learn this skill the better off you’ll be.
This is a primer on where to start investing if you’re a total beginner!
What is investing?
Investing is buying an asset (physical, or intangible) for the goal of generating income.
This income can be in the form of regular payments (like dividends, or rent), or capital appreciation (a higher value on an eventual sale).
An investment is a way for your money to grow. You are betting that the money will be used in a way that will generate greater returns. This can apply to small assets like shares of a company, or larger assets like real estate.
How much money do I need to invest?
In theory, you could buy 1 share of a company, so you don’t need a huge base to start investing. I would not suggest going out and buying one stock of a small company and calling that the beginning of your investing life. But hey it’s definitely possible.
The more realistic answer is start with $1,000. I think that’s a great place to start. It is enough to make a 5% return (or $50 on $1,000) make you feel like you made something back!
What do I invest in?
There are lots of ways to invest. There are a lot of options for assets you can buy.
The easiest place to start is of course the stock market. You can buy a variety of financial assets, like picking individual stocks, mutual funds, ETFs through your bank or broker.
If you were looking for a bigger investment, real estate or other alternative investments are usually popular forms of making these investments.
Isn’t investing risky?
Yes, investing is risky – you could lose your entire investment.
I will not pretend that is not a possibility.
First there is market risk. But historically, the stock market has returned on average 10%. There have of course been good years, and then there’s been bad years, with negative returns.
Then there is the risk related to specific investment. For example, the market on average could return 10% in a given year, but the company you are invested in may have gone bankrupt, chances are you will not be paid back, and of course you would lose your investment.
However, if you are not investing, and your money just sits in a bank account (or under your mattress) it loses value over time. So it is important take an educated risk to grow your money, with a return that are higher than inflation.
Treat investing like a skill. Learn about the economy, learn about your own risk tolerances, learn about asset allocation, or how to diversify your portfolio. The more you know, the more you apply into growing your own portfolio, the better you will get at this investing game over time.
How do I know I’m ready to start investing?
Figure out where you are on your financial journey.
Look at your wealth and money goals. Does investing fit with your goals? If your goal is to build wealth, investing can be a great place to start.
If you have some money stashed away for an emergency fund, and have money left over at the end of the month then you likely have some money to start investing.
If however, your pay cheque is going towards rent, you have high interest rate debt, or are struggling to meet your just basic necessities, focus on those tasks first then worry about growing your wealth through investing.
The bottom line is, if you have some cash leftover every month that you can save, AND are willing to learn. You are ready to start investing and make your money work for you.
Will you start investing?
Cheers,
