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This is a guest post from SimplyForties. I think it offers some great advice about easing into the stock market — especially for women. Be sure to leave your comments at the end, particularly if you enjoyed this guest post.
Still hesitating to take your first step into the stock market? Women, especially when just starting out, tend to overanalyze to the point of inactivity. We’re so focused on doing the right thing that we end up doing nothing at all. Everything in the stock market is on sale right now and I believe this is a good time to get your feet wet. Pick a company you love and buy a few shares. You may pick poorly so don’t use your grocery, utility or mortgage money. Take a little of your discretionary funds and get started.
Taking that first step is the hardest. Once you’re in, you will find that your confidence grows and you will become more comfortable with the process. There is nothing like the feeling of owning a piece of a company with which you have a personal connection: your go-to store when you need quality clothing; that bookstore you love; the hotel chain that always treats you right. Your favorite company is as good a place. Everyone loses money at some point so don’t expect to be different, and don’t invest money that you need to live on.
Many years ago I had a good feeling about a particular company that was involved in the trash disposal industry. As our country is awash in trash I believed this was a good industry in which to invest. At the time I had few resources and I was afraid to take that first step. All these years later I remembered that company and, in this time of bargain stocks, I looked them up. They are still involved in what I would consider a growth industry. Although their stock is down, it has been steadily on the rise since October. I took $300 and bought ten shares. If the bottom falls out for them and I lose my $300 it will have no effect on my life at all. Even if things go well, ten shares will never make me rich. But I’m happy to finally have a piece of a company I have believed in for a long time.
I’ve had similar feelings about other companies. Amazon, Google and eBay are all companies I used extensively before they went public. I can still clearly remember when they did go public. They were so useful I knew they’d be good investments. But, hampered by indecision and a lack of knowledge, I did not buy in. Although I don’t believe in regrets, I know that, had I taken that first step, I would have felt confident in buying shares in each of these companies and today, I’d be glad I did.
Index funds are great for beginning investors, and I highly recommend them. In fact I recommend them for everyone. Find one that invests in a broad range of companies and you’ll be on the right track with your “serious” investing. I have money in several index funds, but I feel no personal connection to any of them. I love my individual stocks because they were all purchased with careful consideration and all represent companies in which I truly believe. They make up a small portion of my portfolio but are the ones I most enjoy owning.
I do not believe in day trading or timing the market or any other short-term investing strategy. When you buy in, especially in this economy, expect to hang on to your shares, possibly for several years. Make sure you can leave your money tied up that long. Remember: You’re buying a piece of a company that you love or that you believe in — a company about which you will have some pride of ownership. What you’re also doing is getting your feet wet. You’re taking your first learning steps into the stock market.
There are many reputable online brokerage firms that make opening an account and buying stocks incredibly easy. The average cost per trade currently appears to run from $4 to $10, with various requirements for how much money you need to open an account. At this point don’t get too bogged down in all that, either. The key is to get started somewhere, and investing in a company in which you believe may be just the way to go!
SimplyForties is a 47-year old single mother of a college-aged son who is navigating her way through midlife and documenting it at http://www.simplyforties.com, where she writes about personal finance, relationships, grown children, the environment and social responsibility. You can follow her at Twitter.com/SimplyForties
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I agree that now is a good time to invest, and that funds are the way to go (I like index funds). However, I also see the merit in using money some “fun” money to buy a company you are interested in. It makes things a little more interesting.
Everyone’s situation is different, but unless you think you’re a budding Warren Buffett or have some special knowledge about an industry or company, you’re probably better off buying a mutual fund or ETF/ETN. Low cost and low turnover are critical elements. The simplest thing for the novice to do is buy index funds (now is the best time since the market has been crushed) and pay attention to asset allocation. A good rule of thumb is % allocated to bonds should roughly equal your age to help weather the ups and downs of the market. Also, assets not closely correlated to the stock market, such as commodity ETNs or gold, have a place in some portfolios, especially in a world where governments have gone crazy printing and borrowing money. The key is to invest consistently in good and bad markets over a long period of time.