With Investment, It Pays to Hit the Ground Running

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Here’s some quick investment factoids. Over the past 25 years, stocks have shown an average more-than-double return over real estate, and more than 4 times the returns of gold. Still, most Americans believe that both of these latter investments are superior to investment in the stock market. Whatever they think, less than half of Americans invest anyway, at all. The stock market is risky, I can’t deny that. When you enter and when you exit have a lot to do with how much you’ll make. But it’s a much more flexible market than that of gold or real estate because it offers so much more liquidity. Sure you own property, but unless you are happy with the rent you’re getting from tenants, or simply satisfied with the knowledge that you own property, your investment isn’t really doing anything for you in the monetary or lifestyle sense. As soon as you want your stock market earnings, you can get them.

Let’s pretend that was exhaustive and convincing. Stocks tend to see good returns if you get in early and don’t mess with your investment too much. As the market grows (providing you’ve invested in index funds that grow along with the whole market), your stake grows. This is why it pays to invest early. The longer you have to let your money grow, the more it can . . . grow!  Online stock trading is a great way for today’s generation of new investors to get their feet wet in the world of investment.

Like I said before, stock trading is all about beginning. You’ve got to make an account, research some stocks or funds, and actually allocate your money for their ownership. Most people don’t get past this point. But you’re not most people. You’re intelligent, resourceful, and able to plan for the future. For folks like you, it is important not just to start, but to start well. Many people make dumb first investment decisions. They lose that first $3000 that could have grown to $10,000 in a year, with careful tending. Because they learn their early investments, they stop investing, or at least never reach meaningful heights, enough for retirement, a new standard of living, or generosity.

For this reason, there are certain kinds of investments that are proper for new investors, those who want to stay in the game for a long time but aren’t, as of yet, seasoned financial minds. For these kinds of people I would recommend 1) buying a home in a reasonably priced market, one that stands to increase in value more than the standard 4 to 5% annually, if possible, 2) get an IRA and max it out annually. These first two methods are government subsidized ways to increase wealth for the common person. 3) Invest more generally in other diverse forms of investment once these first two methods are done. Buy other rental properties, that will simultaneously increase in value. Buy more ETFs (cheaper way of buying mutual funds). Get some safe bonds to minimize certain risk. Strike out into international markets, places where finance has more room to grow.

But all of that later growth hinges on your ability to properly allocate and leverage your early investments. If you lose it all at once, you won’t be able to reinvest it later, and this is the main reason why new investors don’t become great investors.


Categories: Stock Market

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March 23, 2015 With Investment, It Pays to Hit the Ground Running