On our quest to becoming financially abundant, we come to understand that there are three pillars to wealth creation: debt management, income building, and the fun one—investment.
Many of us believe that investing is reserved for rich men with nice suits in the big cities. Not only is that idea outdated, but it’s simply untrue. You can now invest your way into financial freedom from the comfort of your own home and within the unique capabilities of your bank account. Thinking about making your way to the stock market? Here’s a simple black girl’s beginner’s guide to investment.
Be Smart And Start Small
The biggest mistake you can make with investing is doing too much, too soon. Before you jump the gun and start throwing money at companies, take some time to figure out which direction is best for you. Let’s take a look at the common ways to invest:
- 401(k): An employer-offered retirement savings account that comes with tax breaks. Money is withdrawn from your paycheck and invested in funds of your choice.
- Mutual funds: A professionally managed fund that allows multiple investors to put their money together and invest in something.
- Stocks: An ownership share in a company that can be sold for profit or kept in order to receive quarterly payments out of the company’s revenue.
- Bonds: Lending a company or government money with the promise that they’ll pay it back with interest, in a certain amount of time.
If you still have not paid off a good chunk of your debt, or are in poor financial standing with no emergency fund, it is probably not the best time to start with mutual savings or stocks and bonds. Instead, start with your company’s 401(k) and go from there. Most importantly, understand that investing doesn’t mean you need hundreds or thousands of dollars to start—$10 a week in a savings account, research, and a solid plan can get you very far.
Utilize Investment Apps
When it comes to investing, figuring out what to do and when to do it can be pretty tricky. Luckily, there are many different apps and services that will make everything simple and easy for you to follow and understand.
Apps like Acorns offer various features to fit your personal financial needs and goals. If you want to start small, they’ll round-up your spare change and invest it for you. They also offer automatic retirement savings, have a solid checking account and debit card system, connect you to retailers that offer cashback for select retailers, and offer educational content about investing.
Other apps like E*Trade will give you simple tools and in-depth market analysis to help you make smart, well-informed investments in stocks, bonds, and mutual funds. Plus, they provide you with an easy-to-manage brokerage, retirement, small business, and bank accounts so you can manage your money in multiple areas.
Robinhood is also a great choice for intermediate or advanced investors. Their biggest benefit is an unlimited amount of commission-free trades in stocks, bonds, and funds—which means you can trade all you want and not have to pay a fee for every move you make. Robinhood also helps you manage your portfolio, keep track of your assets, and learn the ins and outs of the market in the meantime.
Understand The Risks Involved
When you take a big risk, there’s a chance for great reward as well as great loss. Investment isn’t just a gamble, but a long-term process that benefits from patience and strategy so you need to be prepared for the possibilities of both extremes. Before you invest, there a few things you need to know:
- Investing large sums of money while you are struggling financially is never smart—even if it seems like it’s going to fall in your favor. Be especially mindful when you have children, a mortgage, a business, or anything else that would be negatively impacted if your finances went left.
- The market is going to see many changes over the years, so understand that your returns will always rise and fall throughout time. Do not immediately panic if you see a loss in value because there will most likely be a chance to recover in the coming months or years.
- Selling your investments for less than you paid for them is never a good idea.
- Global events, inflation, unemployment, interest rates, politics, and natural disasters are just a few of the things that impact the stock market. Because of this, it’s important to be up-to-date on world events in order to time your investments correctly.
Give Yourself A Trial Run
There’s no doubt that your first time investing can be scary! And no matter how many books you read or tips and tricks you learn, it doesn’t quite compare to actually putting your money where your mouth is.
If you truly want to see what your investment skills are like before you get started, test the waters with virtual trading apps and games. This way, you get the experience of trading without any real financial investment or risk.
My personal favorite is Investopedia Stock Simulator. It starts you off with $100,000 in virtual cash (and real stock prices) and then allows you to compete on their market, connect with thousands of other traders to learn their methods and strategies, and puts you in real-life circumstances that you’re likely to run into as an investor.