Investing In The Stock Market On The Go

You’re about to change the way you look at money for the rest of your life and find out how easy it is to invest in the Stock Market On The Go.

First off, When should you begin investing in the stock market?

The truth is everyone is a bit different, but at some point, you are going to have to learn to start paying yourself first.  Think of it as another essential payment, just like your mortgage, rent, car, and food.  Paying yourself a percentage of your net income is what you will need to do in order to start investing your money and savings for the future.

If you’re reading in your 20s or 30s you have some time ahead of you, but if you are someone who waited until their 40s or 50s there may be some challenges ahead.  The main thing to remember is regardless of your age and financial status, you need to begin your investing journey now and it’s never been a better time to invest in the stock market than today!

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Step 1: Pay Off High-Interest Debt

Do you have any high-interest debt?

This includes credit cards, student loans, and really anything over 5-6%. 

This can be a huge task for most people, but if the high-interest debt is not paid off prior to investing, it can easily outpace the average stock market returns of 7-10%.

We don’t want that to happen, so your first step should be to focus on paying down high-interest debt using the Debt Snowball or Avalanche methods in order to pay it down quickly.

Step 1 Summary:

• Gather together how much high-interest debt you have.
• Find out how much is needed to pay it off.
• Create a schedule/plan on how many weeks/months it will take to pay off if you focus on it.
• Take action now!

Step 2: Set Up A Rainy Day Fund

Why do most people go into debt in the first place?

This is generally caused by compulsive buying or keeping up with the Joneses, both of these can be curbed by sticking to your needs vs wants and having a monthly budget.

There are instances where debt is inevitable or planned such as medical bills, house maintenance, and car repairs – these all tend to happen at the worst times too.

This is where you need to separate yourself from most people.

Setting Up A Rainy Day Fund

You’ve paid off your debt, your next step is to build a rainy day fund or emergency fund.  This is going to help eliminate the need for debt build-up in the future.

First, how much on average do you spend on essentials on a monthly basis?

Here is an example;

Brent has the following monthly expenses,

• Mortgage/Rent = $800
• Car/Insurance = $300
• Food = $400
• Utilities = $200
• Pet = $30
• Entertainment = $100
• Other = $100
  Total = $1930

Brent should have a rainy day fund that covers all of his basic expenses for the next 3 to 6 months, which is between $6,000 – $12,000.  This should be me sitting in a liquid account such as a high-yield savings account or a money market account.

This is not money that should be invested, or used for a spending spree.  This is the minimum amount YOU need in order to survive during times of financial stress such as job loss, or those unplanned expenses.

You might be saying $12,000 is a lot of money, and you are right! It could take you at least one year to save up that amount of money, but wouldn’t it make you feel good knowing that if all else failed you could always fall back on this rainy day fund?

A real-life example is 20 March 2020, The Covid-19 virus is sweeping across the world causing restaurants, bars, small, mid, and large businesses to close their doors and send personnel home.

I’ve seen a number of people who do not have a rainy day fund, yet they are being laid off, have unplanned child care as schools are shut down, and still have all their normal expenses.

This can and will be a stressful event for hundreds of thousands around the world, and that is why starting your rainy day fund is important and should be started today.

Where To Open A Rainy Day Fund

You want your emergency fund to be separate from your standard checking and savings account, that way your not looking at it.

The best rainy day funds are out of sight and online, as they pay a much higher rate than traditional bank accounts.

Check out this article covering 6 of the Best High Yield Savings Accounts!

Click Here To Start Investing With M1 Finance

Never Invest Your Rainy Day Fund

Let’s assume you just started investing in 2020.

You invested your full $12,000 and decided to live on ramen noodles until your next payday.

Well, this just happened to an investor I know.

4 February 2020 Snap lost 12%, but as it turns out it lost much more going into March 2020.  As of 26 March 2020 it is now down -26.82% which means the initial investment of $12,000 is now worth $8,781.60 losing “$3,218.40” of invested equity. 

Honestly, they haven’t lost it yet, they still own those same shares, they are just worth 27% less than where the investor initially purchased them.

Although this is where some investors begin to act on impulse based on their mood and feeling vs principles and standards.  They will get scared SELLING their shares at a loss, and walk away calling the stock market a scam and that the stock market took their money from them. 

Just remember, the stock market never took a penny from anyone.  If you lost money, you were the one who decided to sell and many will often look back years later wishing they had never sold in the first place.

Step 2 Summary:

• Most don’t think they will go into debt, but life happens – be ready.
• Debt is often avoided by planning and having a rainy day fund.
• You should have enough money in a liquid account accessible within a few days to cover expenses for 3-6 months.
• Your emergency fund should not be invested.

Step 3: Entering The Stock Market

Have you ever heard of anyone betting on an auto race before?

Don’t worry, this will make sense shortly.  People spend hours analyzing their favorite drivers and the different variables involved.  Then, the cars go off and the one you wanted to win makes a wrong turn and bam it’s out of the race.

No matter how much an individual has researched prior to the race, they are often wrong about what racer which will come in first.

Is this issue due to a lack of research or research?

In most cases, no.  This was just a case of bad luck and sometimes the conditions just don’t sit in the racer’s favor.  So, what if instead of picking the winner of this race, you were able to make a different bet on all of the racers?

That way regardless of who wins, you’ve bet on all the racers and not just one.

Stock Market and Auto Race

The scenario above is exactly how stock picking works.  Everyone has their favorite products, services, brands, and strategy for picking investments, but at the end of the day, nobody knows how the market will perform and what stocks will come out ahead.

While you can’t bet on all the racers as a whole, you can invest in a large portion of the stock market with an investment known as an index fund.

An index fund (or index tracker) is an exchange-traded fund (ETF) or mutual fund designed to follow certain rules so as to track indexes such as the S&P 500, Dow Jones, or the Nasdaq.  These funds are designed to replicate the performance of the underlying benchmark as closely as possible.

SPDR S&P 500 ETF “SPY”

SPY is the oldest U.S listed ETF, having begun trading in 1993 (17 years ago), It has gained 420% since its inception.

It is important to understand the difference between an ETF and a mutual fund. 

Mutual Funds are actively managed, and the expenses are often much higher than an ETF.  Also, because they are actively managed most mutual funds do not beat the market.  Even mutual funds that are supposed to track the S&P 500, can underperform an ETF due to the higher fees.

Exchanged Traded Funds are generally not actively managed, and you can invest in many of them which track the S&P 500, two examples of this are the first mentioned above SPY and VOO.

You can invest directly into these funds by purchasing shares on the market under the symbol SPY or VOO.

Most people should just buy low-fee exchange-traded funds, but what they do is talk to a financial advisor or walk into their local bank and get referred to mutual funds which makes that advisor earn a commission based on how much you invest with them. 

Should ETFs be all that you should focus on and avoid going out and picking stocks on your own?

Absolutely not, but by holding ETFs, you get to experience what it is like to be a stock market investor without having to hold single stocks that can be volatile.

If you want to begin investing in the stock market on the go while being able to start a portfolio of Individual Stocks or ETFs, check out the platform M1 Finance.

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M1 Finance offers investors the ability to choose from already created portfolios,  build one from scratch, and offer many other great options such as;

#1 No fees
#2 They have low minimums to get started, $100 in Taxable or $500 in a Retirement account.
#3 Commissions are 100% free, Meaning your $100 or $500 initial investment is 100% invested.
#4 Partial shares, ever wanted to own a stock trading at $100 and you only have $25 to invest? M1 Finance Let’s You Buy Partial Shares!
#5 Auto Investing, create a schedule that works for you and let M1 Finance handle the rest by dollar-cost averaging into your favorite Stocks or ETFs

Step 3 Summary:

• For most investors, single stock picking can be volatile and tough to handle.
• Investing in low-fee index funds is often the best option for most investors, especially beginners.
• Having diverse exposure to the stock market means, you will get both sides of the good and bad, but the good stuff generally will happen more often, leaving you with an average return of 7-10% over the long term.

Step 4: How Stocks Make You Money

When you’re a Stock Market Investor, there are multiple ways you can make money, but we are going to stick with two of the simplest methods.

Method 1 is you can make money through Stock Appreciation. 

Stock Appreciation is when you purchase a stock at $100 and sell it in the future for $125.  That is a $25 difference, it may have taken a few days, weeks, months, or years to achieve – but that is profit.  It is important to know that share prices can be unpredictable, and you should always invest in companies you understand.

Example: If I were to ask you, What you know about Apple Inc (AAPL), I bet 90% of you could easily tell me the number of products they produce, some services they provide, and how often they release new products.

Method 2 is you can make money through Dividends.

Dividends can provide investors with a quick form of passive income. 

Not all companies decide to pay dividends to their shareholders, but the ones that do pay dividends due so using a portion of the company’s earnings. 

Companies generally pay on a quarterly basis (every 3 months), but there are companies that pay semi-annually (every 6 months), and some even monthly.

It is important to know that companies that pay dividends can cut or cancel their dividend at any time, so know that these dividend payments are not always guaranteed.

The Difference Between Growth, Dividend, Aggressive and Conservative Stocks

Stocks that do not pay dividends and grow at a faster rate are generally referred to as growth stocks, and Stocks that pay dividends are generally referred to as dividend stocks.

There are companies that are both growth and dividend stocks.  These companies will generally experience a faster rate of growth than the overall market, but will generally have a lower yield in the 0-2% range.

There are also Aggressive Stocks and Conservative Stocks. 

Aggressive Stocks are considered aggressive if they have no revenue, income, or producing earnings, but the company is filling a unique niche that is innovative and expanding into something new making it more likely to experience higher volatility to the upside.

Conservative stocks are considered conservative due to their revenue being positive but have slower earnings of around 3-6% growth per year, with a steady income.

Remember there are also Exchange Traded Funds (ETFs) which can be considered fairly aggressive, conservative, and ones that pay a high dividend.  So it really depends on, what the individual is looking for, as there is truly a vast amount of companies and ETFs to invest in.

It is important prior to investing, to know your risk tolerance, and how much volatility you are willing to take on.

Do you want passive income?

Do you want to invest in aggressive stocks?

Do you want to invest in conservative or dividend stocks?

Maybe find a few companies with high growth while also paying dividends?

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Step 4: How Stocks Make You Money Summary

• Investors make money in the stock market through stock appreciation or dividends.
• It is possible to invest in stocks that will offer both.
• Growth investors buy shares of companies that are highly innovative and expanding quickly.
• Dividend investors buy shares of companies that pay dividends on a consistent basis.
• It is important to understand what type of investor you want to be and how much risk you’re willing to accept.

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– Investing On The Go