I keep writing and deleting this same post a lot, because there’re so many facets to it, but I swear it’s not really that complicated once you understand how much of it is about tax efficiency. It turns out that answering the question you asked is the best place to start: “tips on starting.”
Tips:
Pick a brokerage that isn’t Robinhood. Fidelity, Charles Schwab, and Vanguard are big names with zero trading fees; Schwab probably has the best user interface since they got ThinkOrSwim when they bought TD Ameritrade.
Get comfortable with the idea that you’ll want to do direct bank ACH transfers to your accounts with the brokerage. You should at least have a normal brokerage account that doesn’t have tax advantages or rules, and a Roth IRA.
Learn about Exchange Traded Funds (ETFs). You can buy shares of $VOO (if I use a dollar sign it means it’s a stock “ticker symbol”) and get a slice of the entire S&P 500. A share of $VT buys a slice of (one of Vanguard’s interpretations of) the entire world market. You can be diversified with just one fund.
Find good websites to research. Bogleheads is a good one that I like. $RDDT had several subreddits that looked at the topic from all different aspects, but now that’s just another thing they’ve stolen from the world.1
Ask questions if you have them and find good websites to research. Most of the buy-it-and-hold crowd’s advice won’t have changed at all across decades (that strategy is where you buy the stock, and then hold it), but search engines tend to push newer websites, and it’s kind of pointless to set up a new website that just always says to buy and hold.
[1] Since we know they do marketing campaigns that will push certain topics/movies/whatever if they’re paid to, AND we know they have carte blanche with shadow bans/hiding posts/etc, has anyone done any analysis to see if they’re being paid to push certain stocks in whatever tattered remains are left over from their investing forums? I guess you’d have to pay them for access to scan their comments now with any kind of speed, and I’ll also guess you wouldn’t be able to buy a product from them that would prove they’re doing it.
Margin is a short term loan from your broker that requires interest payments. As noted in the boglehead article, usually this requires borrowing against your portfolio (or if you’re using Robinhood, you flip the switch that allows margin and borrow against a software bug). The brokerages have high speed computers programmed with people who like money to make sure anything risky you do on margin doesn’t come back on them, and they can/will sell shares out of your portfolio to balance their risk.
This is the best, most consistent strategy for the past 50+ years:
Step 1: Open an account. If you have a 401k, you already have a retirement account, probably with Fidelity. If you don’t have a 401k, Fidelity is still a fine choice. You could also choose Schwab or Vanguard. Don’t overthink it, though, because it doesn’t really matter.
Step 2: Put everything into $VOO.* Every time you get a paycheck, put some of it into your account and buy more $VOO.
Step 3: Don’t touch it. Don’t. I know you want to. I know you want to look at that number. Don’t. Don’t do it. I know you heard about trading options somewhere and you saw the posts of people who turned $10k into $10 million. That’s not going to happen. Don’t touch the money. Leave it alone.
Step 4: When you have enough money to live comfortably for the rest of your life, start selling it to buy bonds.
*Everything else you do might get more money, but it is worse on average. For example, you might be feeling smart, and decide that all these big tech stocks are overvalued. So you’ll buy $RWL instead. That might get more money, but it probably won’t. If you insist on doing something fancy, at least put most of your money in $VOO.
Put everything into $VOO.* Every time you get a paycheck, put some of it into your account and buy more $VOO.
VGT has been beating VOO for almost it’s entire existence. Higher volitility, but better long term results.
Everything else you do might get more money, but it is worse on average
That’s a real YMMV situation. If you want an easy way to guarantee around 10% ROI on your savings every year, no thinking required, VOO is great (VGT is marginally better, but not an enormous difference).
If you get into the weeds, actually learn what you’re investing in, find equities that are undervalued, and stay well diversified, you can do better than the market more often than not.
The big caveat is most people don’t know how to value equities. It’s difficult, complicated, it can carry a lot of risk, and it can be very stressful.
The other caveat is, you won’t do that much better. So if you aren’t working an eight figure+ fund, the difference between 10% ROI and 11% ROI won’t be worth the leg work.
Use common sense, a company that has had profits for the last 5 years is probably a good investment.
Seek information online, with the biggest grain of salt imagineable. If an investment bro or comment online seem manic or urgent, it is a bad investment. Those are the people you are suppose to be profiting from.
If you’re instead looking to trade stocks like Pokemon cards, there are plenty of apps that let you do that. And just like Pokemon cards, you’ll put more in than you’ll ever take out if you trade like that.
Buy the dip, hold. You’ll either eventually come out ahead or the company you bought will dissolve.
As long as he isn’t turning them over in trades, or overweighting his purchases, he can pick stocks like Pokémon cards and do fine. Plenty of buy and hold investors beat the indexes and the ones that don’t usually aren’t that far behind.
Speaking of which, I’ve always been curious to try “investing in stocks”, but have no idea how. Does anyone have tips on starting?
I keep writing and deleting this same post a lot, because there’re so many facets to it, but I swear it’s not really that complicated once you understand how much of it is about tax efficiency. It turns out that answering the question you asked is the best place to start: “tips on starting.”
Tips:
Some links:
[1] Since we know they do marketing campaigns that will push certain topics/movies/whatever if they’re paid to, AND we know they have carte blanche with shadow bans/hiding posts/etc, has anyone done any analysis to see if they’re being paid to push certain stocks in whatever tattered remains are left over from their investing forums? I guess you’d have to pay them for access to scan their comments now with any kind of speed, and I’ll also guess you wouldn’t be able to buy a product from them that would prove they’re doing it.
Margin is a short term loan from your broker that requires interest payments. As noted in the boglehead article, usually this requires borrowing against your portfolio (or if you’re using Robinhood, you flip the switch that allows margin and borrow against a software bug). The brokerages have high speed computers programmed with people who like money to make sure anything risky you do on margin doesn’t come back on them, and they can/will sell shares out of your portfolio to balance their risk.
If you want more exposure than you have cash, there are funds like $NTSX that use witchcraft to effectively capture 90% of the 500 largest stocks in the US (saying S&P 500 is trademarked or something) and 60% of the bond market, for a total of 150%. I don’t know much more about it except to say that if the fund goes to zero, which everything could, your exposure is limited to the money you put into it.
Note that none of this is investment advice, and any cash you stick in a mattress loses purchasing power to inflation.
Sources:
This is the best, most consistent strategy for the past 50+ years:
Step 1: Open an account. If you have a 401k, you already have a retirement account, probably with Fidelity. If you don’t have a 401k, Fidelity is still a fine choice. You could also choose Schwab or Vanguard. Don’t overthink it, though, because it doesn’t really matter.
Step 2: Put everything into $VOO.* Every time you get a paycheck, put some of it into your account and buy more $VOO.
Step 3: Don’t touch it. Don’t. I know you want to. I know you want to look at that number. Don’t. Don’t do it. I know you heard about trading options somewhere and you saw the posts of people who turned $10k into $10 million. That’s not going to happen. Don’t touch the money. Leave it alone.
Step 4: When you have enough money to live comfortably for the rest of your life, start selling it to buy bonds.
*Everything else you do might get more money, but it is worse on average. For example, you might be feeling smart, and decide that all these big tech stocks are overvalued. So you’ll buy $RWL instead. That might get more money, but it probably won’t. If you insist on doing something fancy, at least put most of your money in $VOO.
VGT has been beating VOO for almost it’s entire existence. Higher volitility, but better long term results.
That’s a real YMMV situation. If you want an easy way to guarantee around 10% ROI on your savings every year, no thinking required, VOO is great (VGT is marginally better, but not an enormous difference).
If you get into the weeds, actually learn what you’re investing in, find equities that are undervalued, and stay well diversified, you can do better than the market more often than not.
The big caveat is most people don’t know how to value equities. It’s difficult, complicated, it can carry a lot of risk, and it can be very stressful.
The other caveat is, you won’t do that much better. So if you aren’t working an eight figure+ fund, the difference between 10% ROI and 11% ROI won’t be worth the leg work.
This is not true for 90+% of people who attempt it.
If you were born with an extra luck-bone, go for it. If not, $VOO and turning your brain off is a superior strategy.
I said 50+ years.
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Roth IRA. put 10% in each paycheck.
If you’re instead looking to trade stocks like Pokemon cards, there are plenty of apps that let you do that. And just like Pokemon cards, you’ll put more in than you’ll ever take out if you trade like that.
Buy the dip, hold. You’ll either eventually come out ahead or the company you bought will dissolve.
Timing the market is always a bad idea. You’re routinely better off fully invested than with cash on the side waiting for the dip.
I forgot that there is only ever one stock available to purchase at any given time and the line only ever goes up.
I mean, index funds are a thing, just for starters
As long as he isn’t turning them over in trades, or overweighting his purchases, he can pick stocks like Pokémon cards and do fine. Plenty of buy and hold investors beat the indexes and the ones that don’t usually aren’t that far behind.
Sure. But it seems like this individual doesn’t really know much so like, let them test the waters first.