How to start investing

Investing is something that both John and I are rather new to. Other than our company 401K plans, we’ve never invested any of our money. We’ve always saved and set goals, but when it comes to taking risks with our money? Nope. Not gonna happen. Recently, our mentality has completely changed. We want to take risks, we want to learn about stocks, mutual funds, REITs and dividends, we want to generate passive income streams, we want to see our money grow, we want our money to start making us money. We want to start investing. In other words, we want to be rich 🙂

Let me back up a bit. John and I have always been savers and I’ve mentioned that before a few times here on the blog. We saved $17K when I found out I was pregnant with our first and put that money towards a down payment on a house plus paid off some debt. While living in our house, we paid off our car loan and student loan, bought a few expensive items (the main one being our couch), had another baby, plus saved up $10K more. We live below our means (for the most part) which is what allowed us to save money. We also focused on paying off all of our debt. If you’re strapped with paying debt every month, you have little room to save and invest.

We started with a high yield savings account…

All that time, though, that money was just sitting in our Chase savings account earning practically nothing. I guess I was so afraid we would need that money that I never dared move it into mutual funds or even a high yield savings account. A few weeks ago, we moved $20K into a high yield savings account through Synchrony. That money has already made us almost $7! Not much, but had it been sitting in the Chase account it would have made us nothing!

Added in some mutual funds…

Last week, we put $5,000 into mutual funds through USAA. It takes 3-5 business days for the money to be transferred, so we’re waiting on that to go through. We opened two different accounts (one with $2K and another with $3K) and we are going to contribute $50/month to each of them. I will continue to track our progress on the blog. I’ll also do an update as to what accounts we chose and why once the money is in the account.

And are now getting into stocks

And just now, we opened another investment account through USAA to conduct trades. John’s been following the stock market lately so we figured we’d experiment with $2500. Not much, but if anything this will be a good tool to teach us how to follow stocks and just help us learn about the stock market in general. Even though I have a degree in finance, I really don’t know or understand all that much about how to buy or sell stocks. I mean, I’ve never done it before so of course it’s new to me.

I picked up The Warren Buffetts Next Door by Matthew Schifrin at the library the other day. He discusses “the world’s greatest investors you’ve never heard of” – the first one being Christopher Rees (see his personal website here). Rees averages 25 percent return on his investments and in terms of following stocks, he says, “I don’t think you can follow more than 10 stocks well.” This really spoke to me. I think it’s easy to feel really overwhelmed when you’re just starting out, but even the pros don’t follow hundreds of stocks! I want to learn a few really well, see how they do, then go from there (baby steps, right?!).

Warren Buffett once said, “Diversification is protection against ignorance. It makes little sense for those who know what they are doing.” While right now John and I certainly do not “know what we are doing,” we’re willing to put in the work to get there. Since we’re new to this, we will have most of our money in diversified accounts but will also invest in individual stocks at any given time.

We actually had a conversation about a month ago about how everyone says you should “invest your money,” “make your money make you money” and “get involved with the stock market,” but how do you do that if you have no idea what you’re doing? We came to the conclusion that NONE of these “Warren Buffetts” knew what they were doing when they first started out. What makes them different than everyone else is they started. They took risks, they learned the market, they lost money, they made money, but most importantly – they kept at it and eventually saw a return on investment. Ask me in 5 years about investing and I’m sure I’ll have a lot of advice. Heck, hopefully in one year I’ll have a greater understanding.

So, that’s my advice to anyone who is looking to get started with investing – Just go for it. You’re not going to make a million overnight, you’re not going to understand what you’re doing when you first start out, but you will be learning, and that’s half the battle when it comes to investing.

Any advice for us as we get going?! Do you invest your money in diversified portfolios or individual stocks, or a combination of both? I’m also looking for good website recommendations on following stocks, so please feel free to share!!