When it comes to learning how to invest, many people don’t know where to start. To them, the stock market is a risky place where you gamble your money…
This couldn’t be further from the truth.
In fact, the stock market is the single best method someone can use to grow their wealth and retire.
With that said, I asked a few financial experts to give you their two cents on where someone should start when they’re learning how to invest.
Here’s the question we asked our experts:
“What is the most important advice you would give to someone who’s just started learning how to invest?”
Keep in mind, these are the opinions of other investing experts and they may be slightly different from my own. The best thing you can do when you’re getting started investing is to learn. Learn about what you’re comfortable with and start there because the stock market is the best way to get you to a comfortable future.
The Experts & Their Answers
1. Phil Town, 3 Time NYT Best-Selling Author of Rule #1 Investing
Phil Town is a hedge fund manager and author of 3 New York Times best-selling investment books, Rule #1, Payback Time, and Invested. He has a passion for educating others, and has given thousands of people the confidence to start investing and retire comfortably.
Phil’s answer to, “What is the most important advice you would give to someone who’s just started learning how to invest?”
One of the best pieces of advice I can give to someone who’s just learning to invest is to get the right education. Investing is all about buying companies that you know and understand, with a great competitive advantage, trustworthy management, at a wonderful price. If you can find businesses with all four of these qualities, you may have found yourself a wonderful company that will give you great returns over the long run.
My investing advice is a bit different than what most people will tell you. Most people will tell you to invest in an index, heavily diversify your portfolio, and ride the ups and downs of the market. Now, indexing isn’t the worst thing you can do to grow your money. Over the long run, the market has about a 7% rate of return, much better than bonds, mutual funds, and hiding your money under your mattress. Which is pretty good. If you don’t want to learn how to invest or care about the companies you’re investing in, throw your money in an index. But, what if I told you that there was a better way to invest, that will get you some great returns?
If you’re getting closer to retirement and you’re just starting out, 7% from the stock market might not be enough to get you there. So, keep that in mind. Rule #1 Investing has gotten thousands of people there.
Want to know who made their fortunes using the same investing methods I teach? Warren Buffett.
The right investing education can make you rich and change your entire life in retirement. You just have to commit yourself to following a few simple steps and repeating them.
2. Dylan Lewis, Deputy Managing Editor of Fool.com
Dylan Lewis is the Deputy Managing Editor of Fool.com and host of The Motley Fool’s Industry Focus podcast.
Dylan’s answer to, “What is the most important advice you would give to someone who’s just started learning how to invest?”
Start early and start simple.
The easiest way to convince someone they should invest is to show them the beauty of compounding at work.
The stock market has historically returned around 7% annualized, so investing $10,000 today would give you:
- $19,671 in 10 years
- $38,697 in 20 years
- $76,123 in 30 years
Plain and simple, investing is all about time in the market and letting your money work for you over the long term.
Those numbers aren’t just millennial-finance fodder, compounding can work in the favor of retirees too. Folks in their 60s that expect to eventually be blowing out 80-plus birthday candles should have a portion of their retirement funds in the stock market so that they’re able to enjoy some growth even as they begin taking distributions to fund their golden years.
Even novice investors can easily (and cheaply) enjoy this kind of growth by putting money into an index fund or ETF that mirrors the S&P 500… and forgetting about it. Start there with a work-sponsored 401k, or an IRA or low-fee brokerage account.
If you find yourself regularly checking your performance and reading up on the market, then start following individual companies.
Look for innovative businesses with strong competitive advantages in industries you understand and stay the heck away from penny stocks and day trading.
3. Jacob Wolinksy, Founder of ValueWalk.com
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a small cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ.
Jacob’s answer to, “What is the most important advice you would give to someone who’s just started learning how to invest?”
One of the most important pieces of advice is to not look or listen to hot stock picks. You have no idea what the risk tolerance is of people giving you advice nor what yours is. Additionally, you have no idea if this stock is a 20% position or 1% one. A third reason is that you will likely not know when they sell. Ideally, you will buy index funds and outperform 80% of Wall Street, but for starters fade exotic stock ideas.
FD: I do not purchase any equities to avoid conflict of interest and any insider information. I have a few existing holdings from years ago, but mostly mutual funds and some ETFs. I also own a few grams of Gold.
4. Benny Emerline, Personal Finance Writer for Benzinga
Benny Emerling is a personal finance writer at Benzinga, a financial media outlet specializing in making the consumer’s financial decisions easier.
Spencer’s answer to, “What is the most important advice you would give to someone who’s just started learning how to invest?”
Create a retirement account and contribute money as soon as possible. The earlier you start, the more you let compounding work in your favor.
It doesn’t matter if the market is up, down, or sideways. When you have a 20-30 year time horizon, today’s market is irrelevant.
Buying individual stocks is a great way to get your feet wet and learn about the market. But when you’re first starting out, don’t invest any money that you can’t afford to lose.
The general rule of thumb I go by is, if you aren’t sure whether you’re ready to buy a stock, ask yourself what would happen if you bought today and it fell 50% tomorrow. If you’d sell, you’re not ready
What do you think the best advice is for someone who is just starting to invest?