Patient saving and investing pays off in the long run.
As a Financial Coach, I don’t give investment advice or sell investment products.
My work as a Financial Coach focuses mainly on my clients’ mindset around money and their behavior with money.
But often, my clients WANT to invest, even if it’s just a small amount each month.
- Their Uncle Joe is whispering in their ear that they’d better buy some Bitcoin or they’ll lose out!
- Their BFF Mandy is bragging about her Starbucks stock and how it’s now worth thirty times more than she paid for it!
- And they’ve read about actor/celebrity Ashton Kutcher who’s a very active stock investor, having put money into a number of early startups such as Airbnb and now has a reported stock portfolio worth over $3 billion! https://moneyandmarkets.com/biggest-celebrity-investors/
Many people experience what’s known as FOMO- Fear of Missing Out. But when it comes to investing, slow and steady is the best possible strategy. Trying to ‘time the market’ or find that little known stock that suddenly explodes in earnings is extremely risky and most investors who try these strategies, only end up regretting these decisions.
Many of my clients want to start investing so that their money grows faster than having it sit in a savings or checking account earning next to nothing. And they’re 100% correct!
The average interest rate on a savings account these days is a mere .06%, according to Bankrate.com. At that rate, your money is pretty much stagnant, as that interest rate is not even keeping up with inflation.
Before you run out and buy that hot stock you heard about or that crypto currency your friend swears is going to be worth a million dollars in twenty years, here are some things to think about.
- Spend some time thinking about your end goal for this money. If you’re going to want to use the money in the next few years, investing in anything that is volatile- has ups and downs- may not be a wise decision. Any investment that includes equities (stocks) is a long-term strategy.
While the stock market has averaged just over 10% growth over the past thirty years, that doesn’t mean it’s been up every year. This is the average and there are years where the stock market is down, meaning investors are losing money.
- Understand your personal tolerance for risk and reward. When you’re buying stocks or a mutual fund made up of stocks, the greater the risk, the greater the reward. The smaller the risk, the smaller the return. That’s just how it works. Think about how this makes you feel.
Often, this is called a person’s ‘risk tolerance’ level. If investing in something risky makes your heart pound and palms sweat, the potential reward may not be worth the anxiety you’ll feel throughout the years.
- Investing is not a ‘get rich quick scheme’. I call it a ‘get rich slowly’ strategy. Like any other behavior you are trying to stick with to achieve a goal, you’ve got to have a process that works for your life. Keep it simple and make it automatic. If you try to suddenly start investing a huge portion of your paycheck each month, you’ll never be able to sustain that.
If you have a complicated investment strategy that involves putting money in multiple places, frequent tracking of trends, markets or specific accounts or moving money in multiple steps, you’re probably going to get frustrated quickly.
Talk to a financial advisor or spend some time educating yourself on investing so that can you can set up your automatic monthly transfers from your checking account into your investment account.
- Sticking with quality mutual funds is a great place to start. Every investing platform or company, whether its www.schwab.com or www.vanguard.com or www.fidelity.com, just to name a few, can give you free, basic guidance over the phone or online.
In addition, review each mutual fund’s ‘rating’ in terms of their fees, their returns, their volatility, etc. Make sure your portfolio is diversified by asset class as well. I have found that the free, basic advice that these types of investment firms will offer is excellent.
For more complex investing advice, please connect with an experienced Financial Advisor.