First of all, the first deposit which will clear your bank account is somehow unique. While looking at that figure, one would consider whether one needs to call a financial advisor… and get a bottle of whiskey. Calm down. One does not necessarily have to wear a suit and have millions in the bank to become an investor. All one really needs – is a strategy and courage to click “buy”.
The very first step is very boring but essential. Before buying any share in Apple or Tesla, it is vital to check how many months of expenses one would be able to cover with the amount of money on the bank account. If the answer is “less than 3 months”, put it in a High-Yield Savings Account offered by Ally or Marcus since liquidity is what matters now. Yes, this sounds unnecessary, but one has to survive in case of market crash and not to sell one’s furniture in order to eat.
When the safety net is secured, it is time to look for a 401(k) account offered by one’s employer as soon as possible. This step is very close to getting the free money. If the company offers matching contributions up to 4%, contribute at least 4% into this account. Not to use this benefit is equal to burning part of one’s paycheck. Do not allow inertia win. Enable automatic contribution before the second direct deposit.
How about Roth IRA? This is absolutely the best way to save up money for one’s retirement. Contributions are made with post-tax dollars and earnings are tax-free forever. Open this account right now at Fidelity, Schwab or Vanguard. This decision will help one feel very good about oneself in the future.
Do not be a Wolf of Wall Street. No. Stock picking is difficult. Furthermore, the majority of people who work in finance cannot cope with that task. Buy index funds or ETFs tracking market performance. For example, the Vanguard Total Stock Market ETF or VTI is very famous for a reason. It provides exposure to the whole economy and helps one sleep well.
It is not about being an exceptional investor, it is all about consistency. Establish an automatic transfer to the investment account once per week or month. This strategy is called “dollar cost averaging” and helps to buy more stocks when their price is low and less stocks when the price is high. Just let the process run in the background. Compound interest…
There is never a perfect moment to enter the market. Time in the market is always better than timing the market. So, go and create your account, select some boring index fund and move on. Future you will thank you for that.