The world of investing can be very daunting. There is a lot of jargon to navigate, you may hear completely opposite advice from different (credible) sources, and it’s hard to know where to begin. You’re probably hesitant to get started — and it makes sense!
Even so, it’s important to get over your fear and start investing — the sooner the better. Here’s how.
Educate Yourself on The Relationship Between Risk and Return
Of course, there’s always a potential for loss when you invest. The least risky way to hold money is in cash. If you stash your cash under the mattress, so to speak, the value isn’t going to decrease.
It also isn’t going to increase.
You may lose buying power over the years due to inflation, and beyond that, you’re missing out on a lot of reward. There’s an inverse relationship between risk and return — meaning the more risk you take on with your investments, the higher potential for return. Let’s look at an example:
Just Start Doing
The best way to learn is often by doing. For instance, no matter how much you study in school, nothing can prepare you for your first job. You have to learn as you go — and the first year is often a very sharp curve. I’m a big proponent of starting before you’re ready, primarily because we often never feel ready. There will always be something else to read or learn, and ultimately you just need to make the jump.
The easiest way to start investing is with your retirement fund. If you’re lucky enough to have an employer that offers you a retirement savings vehicle, such as a 403(b) or a 401(k), you should definitely take advantage.
I also recommend putting some money aside with which to practice. Maybe you start by investing in the S&P 500 or a very low risk bond fund. Maybe you buy a couple of shares of your favorite company.
Whatever you decide, by using some money you don’t immediately need (and have allocated for this purpose) There is a power to doing, and by getting started you’ll increase your comfort level.
Sit Back and Make Your Money Work For You
The real beauty of putting your money to work is the growth you’ll experience. Your initial investment will grow, the new money you earn will grow, and the cycle will continue. Your earnings will earn! This is called compound growth, and it’s a beautiful thing. Even if you only earn 3% on your $500 investment, you will have $672 in ten years. That’s much more than you would have had if you left that in your checking account. Imagine what compounding can do over twenty — or even thirty — years.
While I know how intimidating it can be to start investing, the rewards of financial confidence and earnings growth will be well worth the work! Speak with a professional and make a plan. Get started with a small pool of money and deal with each issue or question you have as it comes up. You’ll be seeing the rewards of your hard work before know it — and you’ll never regret trying.
Ashley Feinstein Gerstley is a money coach and founder of the Fiscal Femme where she demystifies the world of money and personal finance. Get her exclusive how-to guide “30 Days to Financial Bliss“ – free for GoGirl Finance readers.