If you’re a new investor your head might be spinning a little as you peek into the world of investing. So many new things to learn! A lot of weird phrases! Too many alleged millionaire TikTok investors!
Fear not. Here are the first four things every new investor needs to know, no matter how much money you make or how afraid of investing you might be.
Investing is a Way to Build Wealth
The plain and simple truth is that investing is a way to build your personal or family wealth. White men have been doing it since forever!
Today it is easier than ever to get started investing in the stock market, thanks to the magic of the internet and things like roboadvisors.
Since many people are unfamiliar with how the stock market works, they feel scared or anxious at the thought of actually beginning to invest. This fear is understandable but it is also a huge handicap to your financial life.
By not investing your money you are leaving your money vulnerable to inflation, and you are robbing yourself of the chance to build a strong financial house. Think of the most financially successful people you know: do they invest? My bet is they do.
Investing Doesn’t Have to Be Complicated
In my work I’ve noticed that most people’s perception of the investing world seems to be shaped by pop culture and vague news headlines.
That has lead to a misconception that investing is always super complicated, that you need an advanced degree, or that the average person is simply incapable of comprehending the mystical stock market.
CERTAINLY there is high level investing and investing CAN be made complicated. Especially once taxes are involved! But investing can also be pretty simple.
There’s even a term for it: set it and forget it investing.
Compound Interest is Sexy AF
Compound interest, how I love there! Let me count the ways. (Or make Instagram Reels about it, whatever.)
Compound interest is earning money on the money you’ve invested AND previous interest earned. It’s very sexy and a huge part of building wealth in the stock market.
Your interest can compound in your savings account too- just at a much, much closer rate that is usually beaten by inflation.
If you’re a new investor, you might think that you can get the same returns from saving your money in a bank account. I am here to tell you that is just not true, historically speaking. Getting invested and getting compound interest to work for you is how people build long term wealth in the stock market. We cover that in detail our class, How to Not Die Broke!
Starting is the Most Important Part
In my experience, new investors often seem to get hung up on WHEN they should enter the stock market.
It makes sense to me; we in the personal finance world spend a lot of time talking about “buy low, sell high” or “stocks being on sale” and I think this perpetuates an idea that there is going to be an ideal time to get started investing.
Waiting for this time leads to a lot of newbies waiting and waiting and waiting and…you get the point.
It’s better to get started! You don’t need to wait for the perfect Instagramable moment to get started investing. You just need to get started. I want every new investor to know that.
Learning about investing is the best way to get involved and get over any fear or hesitation you have. You can absolutely learn the stock market, the same way you learned how the continents formed or why the sky is blue.