Investing is so overwhelming, right? So much jargon, so many risks, and way too many opinions. But here’s the thing: investing is a sure way to grow your wealth over time. Whether you want financial independence, a comfortable retirement, or just to make your money work harder for you, understanding the investing basics is key.
1. Saving vs. Investing: What’s the Difference?
Saving is about keeping money safe for short-term goals—like emergencies or planned expenses—in a bank account. It’s low-risk, but the returns are super tiny.
Investing, on the other hand, means putting your money into things like stocks, ETFs, crypto markets, or real estate to help it grow over time. Yes, there’s some risk involved, but nothing beats investment if you want to grow your wealth over time.
Why? Inflation erodes the purchasing power of your money over time. If your savings aren’t growing at a rate higher than inflation, you’re actually losing money. Investing helps your money grow faster, ensuring you can meet long-term goals like funding your child’s education or retiring comfortably.
2. Myth: “You Need to Be Rich to Invest”
You don’t need thousands of dollars to start investing. Thanks to fractional shares and low-cost investment platforms, you can begin with as little as $50 or $100. The investing basics say to start early, and consistency is the key.
3. Myth: “Investing Is Too Risky”
Every investment comes with some risk, but the bigger risk is not investing at all. The good news? A well-diversified portfolio can help balance things out and grow steadily over time. You need to keep learning, stay informed, and make smart choices along the way.
4. Start Early, Even with Small Amounts
Let’s say you start investing $100 a month at age 25. With an average 7% annual return, by the time you reach 65, your investment could grow to over $300,000.
But if you wait until age 35 to start? You’d have less than $150,000—even though you invested the same amount each month.
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5. Mutual Funds and ETFs: Diversification Made Easy
Mutual funds and exchange-traded funds (ETFs) pool money from many investors to buy a diversified portfolio of stocks, bonds, or other assets. ETFs often have the upper hand over mutual funds since they come with lower fees, no minimum investment requirements, and better tax efficiency. Unlike mutual funds, which only trade once a day, ETFs trade like stocks, giving you more flexibility. They are also more transparent, and you always know what you’re investing in.
Teach Yourself the Investing Basics
The best way to overcome the fear of investing is to start learning. Read books, follow financial news, and listen to podcasts. Open an investment account, start small, stay consistent, and watch your money grow.
Remember, the best time to start investing was yesterday—the second-best time is today. Take that first step, and your future self will thank you.
Podcasts:
- Girls That Invest: Hosted by Sim, an optometrist turned Forbes 30 under 30 investor, this podcast breaks down the world of investing and wealth growth in an accessible way.
- Financial Feminist: Created by Tori Dunlap, founder of Her First $100K, this podcast educates women on personal finance to help them achieve financial independence.
- Queer Money®: Hosted by David Auten and John Schneider, this bi-weekly podcast is dedicated to creating generational wealth within the LGBTQ+ community, discussing financial topics relevant to LGBTQ+ individuals.
YouTube Channels:
- The Dave Ramsey Show: For personal finance and investing basics.
- The Financial Diet: Founded by Chelsea Fagan, this channel offers content aimed at helping women talk more openly and honestly about money, covering a range of personal finance topics.
- Her First $100K: Tori Dunlap’s platform provides financial education and resources to help women achieve financial independence.
- The Plain Bagel: Breaking down complex financial topics and investing basics.