Investing 101: 4 Steps To Starting Small to Grow Big

  • Copy by: Kathryn Cicoletti

Most people have a preconceived idea that in order to invest money, you have to be wealthy, have loads of extra money, and follow the market everyday. This is not the case at all. As a matter of fact, if you approach it the right way, a little can go a long way. Here are some tips to get you started, even if you are still the girl that gets excited when you find a $20 bill in a pair of pants you haven’t worn in awhile.

1) Invest Your Found Money:
Start squirrelling away any small dollar amounts you can and it will turn into $100 or more before you know it! Nowadays don’t just look in the couch cushions, but look closer at your bank and you may have more than you think!  Banks often charge miscellaneous fees and they get away with it because most people simply do not look! I had $30 charged each month in bank fees for no reason then I asked them and they removed it immediately. There also may be a “reason” like ATM fees, checking fees, etc. they are charging you that they tell you, but there is a very good chance you can get them to waive it. 

2) Move Your Savings, No Matter How Low or High Into a High Interest Savings Account:  
Grow your money quicker – don’t just put your savings into the bank you are going to because it’s “easy” – look around and you can find banks that give you high interest savings accounts so you can build your money.  You will often get 10x the annual interest rate you’re getting paid to have the money sit in your savings account at your bank.  

3) Minimize Your Risks In The Market: Don’t Try and Time Your Investments Like They Tell You to on Wall Street:
Okay!  You are finally ready to invest in the market.  Whether it’s $100, $500 or $10,000, slow and steady may not win the race, but it will definitely ensure you don’t lose!  If you have $500, invest $100 each month in the stock market over the next five months. That’s called “dollar cost averaging” – this takes away the guesswork with trying to time the market. By picking a time frame, say five months, and then dividing your amount to be invested by that time frame, you will invest the same amount over a period of time (five months), which helps you from incorrectly timing the market.

4) No Need to Know Everything About Every Company You Are  Investing in – Invest in “Funds” To Keep Your Investments Safe:
This is a great principal to live by following the last tip as you’re not going to follow the market daily, so take that $500 and every month invest $100 in a fund. If you invest in a fund, you’re investing in a lot of different stocks (through the fund, the fund manager picks them for you). This way, you’re diversified and have less risk because if one stock does poorly, then ideally the other stocks don’t and you have lower downside. You can invest in a fund that mirrors the stock market. For example, the S&P 500 is an index of the stock of 500 large U.S. companies that are representative of the overall market. You can buy a fund that invests in those same stocks. By picking an Index fund that mirrors the S&P you’re getting exposure to a large basket of stocks vs. just one. You can call almost any brokerage firm and they will happily help you with this!

This story was originally published on LearnVest.