Are you a beginner to investing?
Wanna learn how stocks and investing can make you money?
Keep reading.
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Before we get into it, I have a free TRAINING for your TODAY if you’re new to budgeting or your budgeting method isn’t working, OR you’re just sick and tired of your method and need to spruce it up a bit. It’s filled with so much juiciness & your money solutions!
For the sake of this article, I’m gonna assume you have no idea what investing means.
You may know what a stock is, but do you really?
FIRST, make yourself a cup of your favourite matcha latte and keep reading. HERE’S MY FAVOURITE.
I’m gonna break it all down for you in this post so that by the end of it, you will not only become interested in investing, but something will spark inside of you.
This will lead you to do your own research simply because you’re not gonna wanna miss out on making some money.
Let’s dive right into it.
There are savings, which is amassing money, and then there’s investing, which is making it multiply.
The major difference between the two are time and the account you use to hold the money.
Savings is what you do with money that you will use for short term goals, ones you have for the next 2-5 years max.
That money is easily accessible and should be in a high-yield savings account.
Beyond that, you want to invest. Investing is any money that you set aside today with the expectation that you’ll be able to take out more money in the future.
Future as in not next week or even next year, it’s a long-term plan (10-40 years). With that long of a horizon, you can make growth, rather than liquidity, the priority.
Time is on your side here, believe me.
What’s wrong with keeping all that retirement money you have under your mattress?
INFLATION
Overtime, inflation erodes the purchasing power of cash. Inflation increases by 2% every year so the value of your dollar won’t be worth as much as it used to be.
Ask your grandparents, about 40 years ago, bread used to cost $0.10……now a loaf is over $3.00!
THAT’s INFLATION.
Based off of history, if you invest now and hold it for 30 years, you are guaranteed to gain profit. The numbers prove it.
So, what is a stock?
A stock is a unit of ownership of a company.
These units of ownership are bought and sold with other investments over the stock market. They include the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (TSX).
When and if you invest in a stock, ignore the short term fluctuations, pay attention to the long term growth.
Stocks can earn you money in 2 ways:
Capital gains:
Means that the stock today is worth more than the price that you had bought them.
For example, if you bought 10 stocks of Apple at $200 each, your initial investment is $2000.
Fast forward 5 years, and now Apple stock is worth $300 each so, you still own those same 10 shares of Apple, but now each one is worth $300.
Your total investment is worth $3000. That’s $1000 more than what you had paid for it!
Remember, you don’t get any of this money until you decide to cash out and sell your stock.
Let’s say that Apple’s price per stock dropped to $150. Now your 10 shares are only worth $1500, that’s $500 less than what you had bought them.
Did you lose $500? No, not until you decide to sell your stocks; that’s when your gains/losses become realized.
Those numbers are just fictional; telling you what you would get if you sold today. Instead, hold on to those 10 shares you have because Apple will most likely bounce back.
Dividends:
These are a percentage of profits that a company pays out to their investors. They do it monthly, quarterly or not at all.
If the company pays out dividends and you only own one of their stocks, they will still pay you no matter what.
The more stocks you have, the more dividends you’ll get. You get paid whether the stock is up or down.
If you do the math, you want to invest in a company whose value grows year after year AND a company that pays you dividends.
(Best case = Dividends + capital gains)
Unfortunately, not all companies pay out dividends.
This isn’t because they don’t wanna pay you, but because they want to reinvest their profits back into the company so that they could increase the value of the company and therefore increase its capital gain.
As a result, you as the investor would be earning more money through capital gains than you would through its dividends instead.
What is the S&P 500 & why do I keep hearing it?
It’s a basket of 500 of the largest U.S stocks, weighted by how much the company is worth (market capitalization).
These stocks combine to a total of 80% of the U.S market cap. They must have a market cap of $5.3 billion to join.
The 6 largest S&P500 are Apple, Amazon, Microsoft, Google, Facebook and Johnson & Johnson.
Here’s a look at what an investment with 7% return will make you based on your monthly contribution & years invested:
$100/month | $500/month | $1000/month | $2000/month | |
10 YEARS | $16,580 | $82,899 | $165,797 | $331,595 |
20 YEARS | $49,195 | $245,973 | $491,946 | $983,892 |
30 YEARS | $113,353 | $566,765 | $1,133,529 | $2,267,059 |
40 YEARS | $239,562 | $1,197,811 | $2,395,621 | $4,791,243 |
50 YEARS | $487,835 | $2,439,174 | $4,878,347 | $9,756,694 |
CRAZY right?
Before you jump into investing, there are 6 things you have to consider:
- Have you eliminated all high interest debt?
- Are you in control of your bills? If not READ THIS first!
- Do you have a solid emergency fund? (3-6 months worth of expenses)
- Do you understand the basics of the stock market?
- Can you fit it into your budget? I explain how to budget here!
- Do you know your risk tolerance?
If yes to all those questions, then start!
*Click here to join my FREE budget TRAINING*
**Disclaimer: I am not a professional and this is not investment/financial advice. This is my opinion and I am not responsible for your decisions so, do your own research, and realize your capital is at risk.**