Invest when prices are low!

So stock prices are falling like a rock! I am scared to invest! Perhaps you should be. Or maybe you should think like a predator and take advantage of the situation at hand.

I recently read an article that said Millennials and the generation after them are afraid of investing. Interesting. Perhaps some education is in order. I have also heard of women being intimidated by investing. Well we are going to change that here by starting simple. I don’t want any of my readers to be poor and not have enough saved for retirement, houses, college etc.

First of all investing is nothing to be afraid of. It’s just saving with a return kicker attached to it. That’s all. Can you use a savings account? Yes? Then you can invest. Simple as that. I think many people get concerned when they see the market move on the news or see XYZ stock drop after earnings or some fancy pants broker talk about annuities or derivatives. Block all of that out of mind right now!

Let’s look at how much more you can make investing versus saving in a checking account, savings account, bank cd and bond fund.

Look at example below. See how the money starts to compound over time for someone saving $750 per month. Then look at those savings over time.

You can download this model and put in your own savings amounts here.

To start with I do not want you to buy individual stocks. I don’t care what hot tip uncle Louie or the guy at the office has tune it out. Those are usually wrong! They only tell you about the ones that worked out. No one brags about the dog or falling knife stock that caused them to lose money. We are not going to put all of our eggs in one basket.

We are going to diversify and that is  great way to minimize risk. For every dog stock that goes south many others will go up. The best ways to diversify are

  1. Broad based mutual funds
  2. Index funds
  3. Broad market ETFs

Let’s talk about each one.

Broad based mutual funds

Here are professional money management team does the stock picking for you. They charge you a small fee of say 0.5% of each year to manage your money. This is called active management and if you make 10% return who cares about 0.5%.

How much do I need to start an account? Usually $2500 is all. Then deposit $200 or $500 or whatever to buy more as you go. Use the add to scan your checks, transfer funds electronically or be old school and send a physical check.

Let’s talk about some examples from Fidelity. I use their funds as examples as it’s super easy and there are no trading fees. I get no commission from them but do use them personally so can vouch for them.

Fidelity Balanced Fund: Stock Bond mix for maximum safety FBALX

Fidelity Large Cap Stock Fund FLCSX

Fidelity Large cap growth fund. FBGRX (I have this one)

Index Funds

SP 500 Broad Market FLCEX Enhanced Index Fund

Rusell 2000 even broader market

Fees 0.25% to 0.4%


Basically just an exchange traded index fund is all. See my post on ETFs.

So you put in $2500 to start and account and selected a fund. Now what?

That’s it. Keep putting money in each month.

What if the value drops? Do nothing. What? Right. Nothing. You are in it for the long haul. Keep putting in money. It will go up over time and you want to be buying a fire sale prices for dollar cost averaging. Don’t by any means stop when it drops. You should be opportunistic and buy more.

When there is blood in the streets buy more!

When can I sell? Not soon. You want the money to compound over time.

But I want to trade stocks.

Ok. Are you ready? Probably not. I need you to read more about investments and do some paper trading first. If you’ve done this set aside some play money and take small positions to get a feel for it. Don’t buy anything risky please. Big names only aftere reading the investment banking evaluation report. Credit Suisse for example provides report and ratings on TD Ameritrade. Stay away from bankrupt companies, options, futures, firms that have no revenue growth or profits.

80% of your money be in funds, 20% in play money is all

See my post on trading and brokers to learn more


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