In 2008, when I was in college, I bought my first stock. I was really into fashion and Issac Mizrahi announced that he’d be designing for Liz Claiborne which I thought was a genius move for the brand. The reinvention that they needed. Their stock was down around 90% from their 52-week high so I decided I’d invest $200 (which felt like a lot!). And then I sat back and watched as my prediction came true, it did turn out to be an excellent move for the brand and it rebounded the stock (momentarily). I tripled my money, sold the stock, and felt a real high from the experience. Making that trade unlocked two things for me - 1. That your skill set and interests can give you a unique insight into investing and 2. To start think about utilizing money outside of just spending and saving. I knew to save but I hadn’t thought about investing yet, it didn’t feel like I had enough money to even consider it. It was something I’d do down the road when I had an established career and a house.
The barriers to entry, when it comes to investing, have dropped dramatically in the last ten years. For much of history, you needed a broker to make a trade for you. You’d call them on the phone and place an order. There was no Robinhood or Public. There were minimum investment amounts, you needed someone to make the trade for you and investing was seen as something for the rich. Technology has pros and cons, but one of the positive aspects is the access it provides. We now all, for better and for worse, can invest from our phones or computers. The good side of that is access creates more equality. The negative side is that unlimited access and design can gamify something that isn’t meant to be treated like gambling. But more on that later.
Now I believe the biggest barrier keeping people from starting to invest is psychological. If you’ve never done it before, it feels risky. And because it feels scary, we either don’t do it or we outsource it to someone else and take a hands-off approach, never really empowering ourselves to understand it. My focus has always been on making financial conversations as inclusive as possible. Certain topics, like investing, often feel reserved for a specific demographic. I want everyone to be included in the conversation, even if you’re not in a place to start investing now, I want you to have the tools and knowledge to know how to start doing it when the time is right. It’s important to me that everyone has the ability to access and utilize a system that allows their money to grow passively. We all deserve to create a financially secure future for ourselves.
Today, I’m excited to launch an investing series! We’ll cover terms and topics that I think will be helpful if you want to start investing but feel nervous about doing it. I want this to be newbie-focused, no experience required. If the idea of investing makes you feel overwhelmed you’re in the right spot.
So how do you start? I never want anyone to invest in something that they don’t understand. That doesn’t take away the scary feeling. The way that you feel empowered to start investing is by understanding what you’re doing. It’s not about closing one eye and hoping for the best. You want to inform yourself so that you’re able to make decisions that feel calculated, not risky. And despite the intro story, this isn’t going to be a post about how to pick retail stocks and become a millionaire. As an investment strategy, I’ll actually caution you against buying individual stocks. This is something we’ll chat about in future posts.
“When do you know it’s the right time to invest” is likely a top-of-mind question for many people. This is a very brief overview but for me, it means:
You don’t have any high-interest debt (i.e. no credit card debt but a mortgage is fine IMO).
You have an emergency fund (savings set aside with 3-6 months of living expenses).
You’re contributing to a retirement account (boring, I know but I prioritize retirement investing before general investing).
You’re not investing money that you have a specific need for in the next few years which is what leads me to our first topic, timing.
Time in the Market, Not Timing the Market:
People are often waiting for the right time to invest. They want to time their investment so they perfectly hit the market low and are terrified of investing at an all-time high. The truth is, no one can predict the market. If you could, you’d be very rich. There will always be a lot of speculation on market performance but it’s just that, speculation. The phrase time in the market, not timing the market is something you’ll hear over and over again and what that means is that your return isn’t made by investing at the exact right moment. Your return is made by how long you keep your investment in the market. The below graph is the Dow Jones performance over the last 100 years. You can see that over the years there were a lot of highs and lows but despite all of the volatility, the market grew. You want to invest with the mindset of “set it and forget it”. Allowing your investment to ride the waves of the market and grow for years (and hopefully decades) is the smartest and safest way to invest. And, it also takes the pressure off trying to find the perfect moment to start investing.
It also means you shouldn’t invest money that you need by a specific date. If you’re planning to buy a house in the next few years, you’re better off keeping the money in a high-interest savings account instead of the stock market. The reason is the market is volatile, if you find your dream house and want to buy it but the market happens to be on a down run, you won’t want to sell. You don’t want to tie up cash that you have a plan for, investing money that you’re not planning to access gives you the freedom to not stress over down moments and to know you’re in it for the long haul.
And that’s it for episode 1. I’ll be back soon!
So excited for this. I’ve always really wanted to understand the stock market better and hopefully make a few good investments. Thanks! 😊