6 second take: By learning what to do with a small amount of money, it will prepare you for what you can do when you have enough to make real change.
“How do I start investing?” is probably one of the top three questions I get asked when I meet with someone. If you've never invested in the stock market before or the closest you've come is checking a box (and crossing your fingers) on your 401(k), this question can feel like opening up a Pandora's box.
When our financial planner (shoutout Sophia Bera!) recommended that Dyalekt get a Roth IRA, the question really hit close to home. Dyalekt had never had an investment account before. In fact, he didn't really like the idea of investing in big companies whose business practices he didn't believe in.
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This was a whole different can of worms to open.
Knowing this, the first thing I asked him to check out was Motif (now Folio) Investing. The basic premise is that you invest in ideas that are represented by a collection of stocks. You can invest in solar, wearable tech, the marijuana industry, brands teens are into, socially conscious companies, and more. You even can create your own and make money from motifs you create that other investors choose to invest in.
He loved the idea and set up an account right away. He spent the next several hours combing through different motifs. In fact, he even started doing his own research on companies he wanted to invest in. Only problem was, when we went to Motif to create his own collection of stock, most of the companies were not available on the platform because they were penny stocks.
He was back to square one a bit. He put some money in companies he found the least objectionable, namely Twitter, LinkedIn, and Facebook. Then he kind of forgot about it for a few months.
When he went to check his portfolio again, he looked up and said,
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“Pam, I need you to help me diversify. I've lost some money on this.”
I wasn't sure if he was asking for help picking more stock or putting some money in ETF's or mutual funds (basically a collection of hundreds or thousands of stock, usually based on an asset class, like large, medium, or small US companies, international stock, real estate, commodities, etc.).
We talked about about what it meant to put money into something like Wealthfront or Betterment and he said he didn't want to be putting money in all those companies. Wouldn't he have money in Walmart? Could he really do that and still feel good about it?
Next stop, Goldbean. I suggested he try this platform out and possibly use it in conjunction with Motif. Goldbean takes your spending information and analyzes it and tells you which companies you're spending in as a consumer that are also publicly traded. It then helps you decide whether or not you should consider putting money in these companies as an investor.
We linked up one of Dyalekt's credit cards and waited for the app to do its thing.
What popped up was even more alarming. Exxon? Chevron? Walgreens? Wyndham? American Express? He didn't want to invest in these companies either.
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Worse yet, we were running out of time to record this investing show and felt like we were just going around in circles. And then it hit him. He was already consuming from these companies he said he didn't want to invest in. He was already taking part in the system on one level.
These companies that are publicly traded are also so big that you can't escape them. This isn't necessarily a good thing or a bad thing, but it is a reality.
By learning to understand how it works on the investor side as well as the consumer side on this large scale, we empower ourselves to be more aware on both sides.
By participating in the process of investing and being a full participant in it, we can get insight on what's possible to invest in within our own communities.
By learning what to do with a small amount of money, it will prepare you for what you can do when you have enough to make real change.
