I’ll be honest, investing on your own is not easy for many people, in fact it can be terrifying. That being said, there is no reason why it shouldn’t be attempted by everyday people; in fact, it should be highly encouraged.
This piece is inspired by an article interview from Business Insider with M1 Finance CEO, Brian Barnes, who gave his take on how everyday investors can be empowered to take the plunge for themselves. M1 is an interesting company and is also involved in the advancement of robo-investing services. Users can pick the stocks they want to invest in and then they can determine what percentage of their portfolio they want each position to make up. The company will automatically make updates as you put in more money and as stock prices fluctuate to maintain your preferred portfolio allocation. I.e. if you want MSFT to make up 25% of your portfolio, M1 will balance your portfolio as such. However, unlike most brokerage sites, M1 doesn’t charge a fee for users to buy a stock. It does, however, charge users an annual percentage-based fee on their assets.
While these are some reasons given by Barnes in the article, these are also areas that I would tend to focus on when giving advice to new investors. Just be aware, that all investing involves risk and potential loss of principal.
1. Embrace Individual Stocks – while it is tempting to always go the semi-safe route and buy things like ETFs and mutual funds to simply “set it and forget it,” there is a lot of smart money being put into stocks that you benefit from everyday. There’s a great learning curve here when it comes to stocks, but it can also be a great way to invest for the long-run. If you eat at Chipotle or get a Starbucks coffee every morning, odds are you and everyone else like you will do this for years to come so why not get in on some of the earnings potential?
2. Pick a Couple Investments That Will Get You Excited – trends are silly because people will follow them and then go follow something else, but when you are excited about a stock, trends won’t make a difference. You don’t need to buy what they experts buy; you should buy what makes YOU happy. If you’re an avid collector of Nike shoes, it ought to get you pretty excited to invest in Nike. Hopefully you buy it at a time when the trendsetters don’t like the stock because that’s all the more profit for you in the long-run. YAY!
3. Stay Consistent – nothing kills a strategy like inconsistency, so in order to be successful with your stock picks long-term, it’s important to stay consistent. It’s tempting to see your stock drop after buying it to go jump into an expert’s strategy, but is that really what’s best for you? Many of these talking heads on Wall Street will pitch or give negative outlook on companies without ever setting foot in their stores or talking to customers. Don’t change your strategy to take advice from someone else. Fun fact: “experts” are often just as wrong as many times as they are right.
(This article was originally published on GradMoney on August 29, 2017)