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Investing 101

There are lot of folks just starting out in this thing called adulting, you know, bills and brunch. One of the benefits of adulting is that hopefully you’re making a lot more money than 12 -year old you. Now that you are making boatloads of cash or somewhere en route to boatloads– at your big age you can now open up investment accounts. Watch your money grow exponentially! Sounds exciting eh? Just to be safe, let’s make sure we understand what investing is- “it is the distribution of resources, usually money, with the expectation of generating income or a profit.” I, personally, am heavily invested in real estate but I have come across other avenues to diversify where to stash your cash and get pretty decent returns. I’ll lay those out for you below:

Before you start investing– open a HIGH INTEREST savings account. The difference is astounding in the amount of compound interest you will receive compared to a regular savings account with Bank of America, Chase, Wells Fargo, etc. For more info on this check out my other post on savings accounts.

There are two avenues you can go down when it comes to investing: Self-Directed or Managed.

Self-Directed

Self-Directed accounts are for those who want to learn the ins and outs of investing whether that be in stocks, real estate, forex, or even lending. Understand that managing your own investments does take time for you to learn the ropes and time to do research (unless you’re buying research or following along with someone else and mimicking trades) to do it correctly. If you have the time to buckle down to learn plus the time it takes to manage your investment then self-directed may be the route for you. To gather all of my research I use TradingView.

Typically all you’d need to do is open a brokerage account, transfer money to it, you can begin trading (different for real estate.) There are many brokerages such as Charles Schwab, TD Ameritrade, Fidelity, RobinHood, WeBull and plenty others. A lot of these platforms have their own libraries for you to conduct research to base your investment trades off of. An easier way to start self-directed investing is to put your money into an ETF (Exchange-Traded Fund) which is a group of assets varying from stocks, bonds, or commodities that way your investment is across the performance of multiple assets. It is also a very low investment threshold and can start many with as little as $100. However, even with this research must be done on what ETFs to place your money leaving room for user error.

Managed

If you’re like me then you may not want to invest hours doing investment research, watching charts, and learning investment lingo; then your best bet is to go the Managed route. Why not let all the hard work be done for you?! These are great cause you open an account with most of the above brokerages, deposit your funds, and they’ll invest it for you accordingly. More than likely they’ll ask what your financial goals are and what your risk tolerance is to gauge how best to allocate your money among different assets. You also get the benefit of having a financial advisor to update you on the markets and why they recommend certain investment strategies that align with your goals.

Now there is a downside of this! Since you’re having someone else do all the work then you’ll need to pay this person for their efforts. (Unfortunately, in this industry and in many others, people get paid for effort and not based off results.) Your financial advisor will charge typically 1% of how much they are managing for you, sometimes as much as 2%. So if your portfolio grows 7% for the year they would get 2% which means your portfolio only grew 5%. Some brokerages even charge an annual fee just for having an account with them. Make sure whatever brokerage you decide you get a full list or lay out of the fees that could be associated. I’ve attached some of the usual ones here:

Bonus Managed: Robo-Advisors

What’s this you ask? It’s the new way to get in on the action without having to know all the latest market trends or without having to pay high fees to a brokerage that may or may not do well. A Robo-Advisor is exactly what it sounds like, a financial advisor that manages your money for you with little to no human intervention! Artificial Intelligence reading the market and applying your financial goals and risk tolerance to not only find the best investments for you but to also buy and sell an asset when necessary. Robo-advisors charge a fraction of what the big brokerages charge and remove a majority of human error when investing, you know what we call this?! a WIN-WIN!

Some of the best stock Robo-advisors include:

Now most of these will get you started on investments in stocks as an asset class but interested in Real Estate investing without all the work then try these crowdfund apps:

  • FundRise
  • YieldStreet
  • Realty Mogul

Of course do your own research when thinking of investing but figured I’d help get the ball rolling. If you decide to go robo-advisor I suggest setting recurring deposits into the account. A portion of each paycheck can be directed to the account, each app should offer that option in your settings. Set it and forget it!

Category: Investing
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