Please enjoy this guest post provided by John from Frugal Rules today!
If you haven’t checked a calendar lately we’re in a New Year. With a New Year means a proliferation of resolutions. Some of the more popular resolutions have to do with anything from saving money to losing weight to getting a better job – at least according to USA.gov.
Those are all admirable resolutions to have. One that I’d add is the desire many people have to start investing in the New Year.
Having worked as a stockbroker, it never failed: the month of January meant helping countless people start to invest. It can be an overwhelming thing for some, especially if they’ve never really had any experience investing in the stock market.
It doesn’t have to be, though. With that in mind, there are a few of what I consider to be ‘must follow rules’ when it comes to getting started investing.
If you’re looking to get started investing in the New Year, then hopefully some of these basic yet highly effective rules will guide you along the right path.
Don’t Let Perceived Lack of Money Hold You Back
One of the most common misconceptions I saw in my former day job was the belief that you couldn’t invest in the stock market unless you had tens of thousands of dollars.
That’s a myth! The truth is that you can invest in the stock market with little money. Now, I realize the amount may be relative to your given situation, but many don’t realize that you only need a few hundred dollars to get started investing; in fact, many brokerages allow you to open accounts for $500 or less.
While more is always better, having just a little shouldn’t stop you from beginning to invest. If you don’t have as much as you’d like, use it as a challenge to get started even sooner.
If you don’t have extra funds to get started now, then set aside money each month. By putting away an extra $20-$50 per month, you’d be able to get started within six months at several online brokers.
Trust me, it all makes a difference and your future self will thank you that you started even though you had little money to invest.
Automate, Automate, Automate
Life is busy. I get it. When life gets busier, things you want to get done but don’t have time for get put on the back burner and are forgotten. Unfortunately, investing for your future is one of those things that can be forgotten.
This is where automation comes in. If you’re struggling with staying on top of adding money to your investment accounts, yet have the funds to do so, then the most important thing to do is to make it automatic.
Many online brokers, such as Motif Investing and others, allow you to set up automatic deposits at virtually any interval you can think of. Not only does this take care of it for you automatically, but you also are much less likely to feel the money coming out of your bank account each time.
If you have a 401(k) then you should be able to do something very similar from increasing what’s taken out each period to setting up annual rebalancing.
Make It Simple
Far too many investors make it difficult on themselves when they first start investing. There are a variety of reasons for this, but it often leads to many trying out things they shouldn’t be doing in an effort to try and beat the market.
So, what should you be looking to invest in? Generally speaking, low-cost index funds are going to be the best things for you to look at, as they will stay with the market, not to mention keeping things much simpler for you.
If you have an online brokerage account, many of them will have a list of some of the top rated funds listed by category for you to choose from.
A simple internet search will also lead you to them as well. If you’re just investing in a 401(k) then most plans will have at least a few low-cost funds to choose from – if yours doesn’t, then ask your Group Benefits area to get some added as it’s their job to help you.
If you’re just starting investing this year, great for you! Just remember that by following some simple and effective tips, you’ll be well on the road to growing wealth that will benefit you for years to come.
John Schmoll is the founder of Frugal Rules, a blog created to help people experience financial freedom. John is passionate about budgeting, saving and investing and enjoys sharing his knowledge and experience with others so they can avoid making some of the mistakes that he made. A veteran of the financial services industry, John has an MBA in Finance and experience as a licensed stockbroker.
