Introduction to Investing in 3 Steps
If you’re anxious about starting to invest, you are not alone. So many would-be investors fear losing money or making a mistake, that most choose to keep their capital in low-yielding savings accounts.
However, there are only two ways to make money – by working for it or by making your money work for you. Ideally, you’ll start your life working, and wind up living off your investments. To do that, you need to put the money you earn in yield-generating investments as early in your life as possible. Leaving it sitting in a savings account at 1% will keep you stuck.
Here’s a simple three-step introduction to investing.
Step 1: Practice Before You Invest
Remember when you tried to drive a car for the first time? Awful car accidents happen every day, but being able to go anywhere you want was worth the risk.
You didn’t just hop in the family car and zip onto the freeway, though. You took Drivers Ed. Then you got a learner’s permit. You practiced until you were able to pass your driver’s test.
There’s no need to zoom from 0 to 60 mph when it comes to investing, either. Start by learning. Practice some mock investing before you do the real thing. Take your time getting comfortable with becoming an investor, just like you took your time becoming a driver.
As a start, check out YieldStreet’s Learning Tools to get up to speed on investing basics. Once you’ve learned a bit, set up a mock portfolio. It’s fun and will give you an anxiety-free opportunity to practice without risking any money. We like Investopedia’s Stock Simulator, an app that lets you trade pretend money in a virtual environment.
Step 2: Skip the Volatility
Stock prices have risen and fallen at dizzying speeds that have kept investors tossing and turning in their beds at night. You’ve probably seen the Dow Jones graphs on the news and thought, “Thanks, but no thanks.” Until now, most investors didn’t have the access to invest outside the stock market. All that just changed. The JOBS Act is finally enabling accredited investors to learn about alternative investments that are far less volatile.
“Specialty finance” investments are largely uncorrelated to the stock and bond markets and are lower in volatility. These investments are backed by assets, thereby reducing risk. Should anything happen to the investment, the assets may be sold to help pay back investors.
As you get more comfortable with investing, you’ll choose how you want to diversify your investments among stocks, bonds and alternatives. For now, just know you don’t have to ride the Dow’s roller coaster to become an investor.
Step 3: Start Small and Don’t Risk Your Rainy Day Fund
Hold off on investing until you’ve built up a rainy day fund in your savings account that will cover around 6 months of expenses.
When you do feel ready to start investing, start small. Only invest an amount you feel comfortable risking. That may be $500 or it may be $50,000. Only you can decide.
Follow these steps to reduce your anxiety around investing and get off the sidelines and into the game. It will be worth it!
Published:
06/20/2016
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2 Represents an average net realized internal rate of return (IRR) with respect to all matured investments in your portfolio, utilizing the effective dates and amounts to and from the investments and net of management fees and all other expenses charged to the investments. Past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. All securities involve risk and may result in significant losses, including the loss of principal invested.[read more]