How Investing Works/ How to start investing

Investing is a hot topic these days and if you’re new to it I’m sure you have a lot of questions.

What is investing?

How do I start?

Why should I invest?

What should I invest in?

These are just a few of what seems to be an endless amount of questions you want answered before you dive into the investing world.

When you think of investing you probably already have an idea in your head of what it is and I can probably take a guess as to what that idea is. It probably involves a bunch of guys in suits yelling across a room while staring at computer screens. The computer screens are filled with different numbers and prices that are constantly changing.

This isn’t exactly true but it isn’t false either. That idea of investing is actually what happens on wall street. There’s also a million other ways that people can invest and ways that you can invest as well!

What is investing?

Investing as defined by Oxford Languages is “expend money with the expectation of achieving a profit or material result by putting it into financial plans, shares, or property, or by using it to develop a commercial venture. “

So what does that mean? Put simply, investing is where you spend time, money or labor with the goal of creating more money or property.

For a easy way to visualise it let’s create a scenario. Your friend Josh is starting a lemonade stand, Josh needs money to purchase the lemonade, sugar and other materials to make the lemonade and the stand so he asks you for $100. Josh says that if you give him the $100 he will pay you back $110 dollars. You decide to give him the $100 and a week later after making some sales Josh pays you back $110. You just invested in Josh’s business and were rewarded by earning $10. This is a very basic version of investing.

Simply put, investing is where you lend someone else money in the hopes of being paid back more money. Companies or individuals are willing to pay you back more money because they need the funds you provide to grow and scale their business.

This is the basics of investing. It’s also the same as when you go to the bank to get a loan. The bank lends you money with the agreement that you will pay them back more money then they loaned you. The bank essentially invests in you.

What can I invest in?

There are a endless supply of things that you can invest in. Here’s a list of some of the big ones that you probably have in mind when the word investing comes up.

  • Stocks
  • Bonds
  • Public Companies
  • Private Companies
  • Individuals
  • Real Estate/Property

These are some of the big ones that everybody thinks about when they hear the word investing. Particularily the stock market.

These aren’t all the investment opportunites that are out there though! Investment opportunities can come in all shapes or sizes. Like our friend Josh from earlier, or maybe another one of your friends or family has a great idea but they need money to get started. You never know when an investment opportunity will show up!

Being a average person or individual allows you to invest in a plethora of different things but also holds you back from investing in some of the bigger investment options. The really big investments require you to be a accredited investor. We’ll touch more on that later.

Is investing right for me?

Is investing right for me? This is a question everyone asks and the answer is always yes! Investing helps you build a future for yourself, your family and friends! If you have any spare money, time or materials you should certainly begin investing! You no longer have to be a Wall Street Stock Trader to get into the investing world. If you want to make more money, secure financial freedom and build a better future investing is a great way to do that!

What do I need to know before I start investing?

Before you get started investing, there are a few things you need to lay out.

The very first thing you want to do before you begin investing is write down your goals. Why do you want to invest? What do you want to achieve? What is your timeline? All of these things are very important to WRITE down. By writing down your goals it helps you anchor them in reality. Without that, you can lose sight of why you are doing it.

The next step is creating a Action Plan. This will help guide you on your investing journey. Your action plan should be as specific and detailed as possible. For example, you need to spell out exactly what you are going to invest in, how much you are going to invest, when you are going to invest and how often. By laying this out on paper or a document it will help to guide you through the various stages of your investing journey.

After writing down your goals and action plan the next step is to get your finances in order. This is a must. You can’t invest if you don’t have the time or money to do so. Make sure your finances are set so you know exactly how much you can invest if any at all. If you have lots of debt and already have a hard time making ends meet, you may want to hold off to start investing. Only begin investing if your finances are in order. Remember, when you invest there is no guarantee that you will make money. Sometimes you may even lose money.

Where do I start investing?

If you are brand new to the investing world we recommend that you start by contacting a financial advisior. Financial advisors are people who make a living by helping individuals invest. When choosing a financial advisor it’s very important that you work with someone who fully understands your goals, needs and plans for the future. You can contact your bank, local brokers or use online services to help find one.

Financial Advisors specialize in getting the whole picture of your life. They help you analyze your financial standing and help you create a plan unique to you. Everyone should have a financial advisor.

Financial advisors can help you select the best investment options for you. They also typically have access to different funds and opportunites that the individual doesn’t.

If you are a complete beginner to investing we recommend doing this to get into the space.

How do I invest in the stock market? (Without a Financial Advisor)

If you elect to begin investing in the Stock Market individualy there are a few steps that you need to do before you can.

M1 Finance Broker Platform

The first thing you’ll need to do is find a Stock Broker to create an account with. Here are a few brokers that are good for beginning investors.

  • Robinhood
  • Vanguard
  • M1 Finance

Each one of these brokerages has it’s pro’s and con’s. If you are looking to do some light stock trading we recommend Robinhood as it’s commission free trades. If you are looking for more passive investing and Dividend Growth we recommend M1 Finance. If you are looking at doing some serious investing and large sums of money Vanguard is probably your best choice. It’s by far the most estabilished.

When you choose your broker you’ll have to create a account. This is pretty simple and they walk you through the process. You’ll be asked to supply forms of identification and some basic questions regarding your income and net worth.

After you’ve created your account it’ll take anywhere from 1-5 days to verify it with the Federal Government then boom! You’re ready to start investing in the stock market!

What stocks do I buy?

Your account is created, you’ve transferred some money into your Brokerage account and you’re ready to buy some stocks!

The next burning question is “What stocks should I buy?” . Unfortunately there is no right or wrong answer to this. Entire businesses are built on trying to predict the fluctuations of the stock market. One analyst says to buy US Steel whereas the other says Cleveland Cliffs. When you get into the Stock Market without the help of a financial advisor the stocks you choose to buy are entirely up to you. You are responsible for doing the research necessary to determine what to buy, when to buy and when to sell.

Overall, investing is a great way to create wealth and financial freedom. In today’s information age it’s become more accessible then ever to get involved. The most important part about becoming an investor is to clearly outline your goals and plan of action while researching your investiment opportunites. The more you can educate yourself about the different types of investing the more likely you are to succeed. Always continue to learn, consume any resource you can and be diligent in your research. This will only help you do better. Welcome to investing!

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