Okay, you just graduated from high school and your bank account is almost empty. This is alright, in fact, it is great. Because you got something far more valuable than money – time. Time is the ingredient of investing that the millionaires wish they had. You do not have to be Wall Street banker to start making your own money. All you need is your smartphone and some money in your pocket.
Get ready to be scared a little. Of course, sometimes you will lose money. Because there will be market dips. They exist. If you start selling all your things as soon as your portfolio gets 2% drop you will never leave the poverty. Imagine your money as a little plant. You will not dig into the soil every day to check roots. No, you water it and ignore it. Learn to be patient because you will need it very much.
Forget about the thought of purchasing the share of Amazon. It is too expensive. Start working with fraction shares. For example, you can buy the share of a company for a dollar on Robinhood and Fidelity. It is funny and it is your owning. Now you can own little bits of Apple, Tesla, or Disney without starving for a month. It is a good way to learn without risk of losing your rent money.
Picking stocks may seem scary for beginner investor. But there is another way of investing. You buy the whole market. Yes, you heard me. It is ETFs. Exchange Traded Fund is a collection of hundred companies in one package. When you purchase VOO or SPY, you bet on all the most successful companies of America. It is boring. It is safe. And, yes, usually it beats professional stock pickers. 📉📈
It comes the most crucial point – Dollar Cost Averaging. It sounds complicated, but it is not. You just set up an automatic transfer of some money to your investments account each payday. It can be any sum: ten dollars or fifty. You invest your chosen ETFs or fractions no matter of the condition of the stock market. Sometimes you buy high. Sometimes low. In average, it levels off. You get rid of emotions from the process which kill beginner investors.
Surely you think you need a sophisticated brokerage account with a leather chair? Forget it. You open a Roth IRA immediately. You put your money that is already taxed in it and it grows tax-free forever. And when you retire and withdraw your money from it, the government takes nothing from you. It is the best deal in finance. As you are young now, your current tax bracket is low. So lock it in now.
Surely you will not become a millionaire with the first investment. If you want it you can try your luck with lottery. But you will never become rich with lottery. It is true. But if you start investing your pennies from eighteen years old, you will be a millionaire when you retire. Because you will witness how the Compound Interest works. And you will feel like a wizard. Your money creates money and then your money creates money. It creates money again and again. It is like a ball rolling down the hill. Just make it go. 🚀