What is Investing and How Can I Get Started?
What is investing?
Investing is simply putting money into an asset that is expected to give you profits in return.
Investors put their money in Stocks, Bonds, Real Estate, and commodities such as gold and silver.
It’s basically like a big game of Monopoly.
You invest money into assets, your assets make you money, and you buy more assets until you own very many of them.
Most millionaires and billionaires invest their money quite a bit. Many have started with nothing and made millions from investing alone.
But I thought investors were already wealthy? I don’t have much money at all. Can I still invest?
Absolutely, every investor starts somewhere and many of them didn’t start with a lot of money.
Why can’t I just put the money in a savings account?
You can but if you put your money in a savings account your money will increase at the rate of inflation which is about 2% a year. If you put your money into the S&P 500 which is what Warren Buffet recommends, you’re money will grow on average by 10% a year, which is much faster growth than a savings account.
Who is Warren Buffet and what is the S&P 500?
He’s the CEO of Berkshire Hathaway and is also the most successful investor of all time. His net worth is approximately 82 billion dollars. For beginner investors, he recommends investing your money into the S&P 500 to make 10% yearly returns on your money.
The S&P 500 is an index of the 500 largest U.S. publicly traded companies by market value. So if you invest in the S&P 500, you’re investing in the 500 largest companies in America at the same time. For example, if 30 companies are doing poorly, the other 470 companies keep rising and making you money.
Warren Buffet – “I always knew I was going to be rich. I don’t think I ever doubted it for a minute.”
But the stock market crashed in 2008. Isn’t it dangerous to invest in stocks?
Warren Buffet doesn’t think so and he has 82 billion dollars so I would follow his advice. He’s not worried about the future of America at all because he knows that Americans love to be consumers.
When Americans go shopping and buy products from stores, they’re giving billions of dollars to companies such as Amazon, Walmart, and Target and since most Americans use debit cards and credit cards to shop, they’re also giving billions of dollars to banks such as Wells Fargo, Bank of America, and JP Morgan.
The retail industry and the banking industries have always been profitable for investors and that is where most old-school investors place their money.
If the stock market were to crash, Warren Buffet says to ignore the negative headlines, remain calm, be patient, and don’t take any money out of the stock market. When stocks drop drastically it is due to masses of investors selling stocks due to price drops or bad news. He says to be optimistic because usually what follows a large sell off is a large buy back of stocks.
As soon as investors see prices dropping many others will see it as an opportunity to buy stocks at cheaper prices and the prices will end up increasing again. So never sell your stocks if the market is doing poorly for a few weeks. It is a game of patience.
You can’t read a negative headline about the stock market and lose control of your emotions and sell everything. That won’t make you any money. So once you invest, stay invested if you want to be rich. That’s what Warren Buffet did and he’s a billionaire.
Okay, that makes sense. How can I get started investing?
An easy way to get started investing for beginners is an android/iphone app called Robinhood. Unlike most brokerage’s, Robinhood is made for beginners. They allow you to trade stocks without trading fees and have a good interphase for beginners.
The app allows you to see your daily profits, it lets you create a watch-list of your favorite companies like Amazon, Facebook, Microsoft, Google, and Netflix, and others and it’s very easy to learn. You can also transfer money to it instantly with a gold account which I think is an amazing feature.
My Top Stocks:
- Amazon
Amazon is the largest e-commerce giant in the world and destroying competition left and right. I think it's a safe bet that Amazon will be around forever. The share prices are a bit expensive for beginner investors but regardless Amazon is still considered to be one of the safest companies to invest in. - Microsoft
90% of the business world uses Microsoft's technology so I think they will remain strong as well. - Square
This company has experienced massive growth over the past few years. They make payment processing more convenient for small businesses and they're just beginning to expand internationally. - Visa
Visa is one of the largest payment processing companies in the world, they conduct much of their business internationally, and they've been growing very quickly. - Mastercard
Mastercard is also a payment processing company and they're growing almost twice as fast as Visa right now(60% annually).
Stocks such as the ones in my list are called growth stocks.
They make investors the most money out of any other stocks in the stock market.
Don't follow what all the older investors are doing because they have a low understanding of new technology.
Warren Buffet is a genius when it comes to discovering the intrinsic value of a company but he has admitted that he doesn't even know how to use email.
So following a young, successful, more tech-savvy investor would be more in your favor especially at the fast pace that technology is advancing now.
Good luck.
