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How to Start Investing in 2021

Use this Simple Strategy to Get Started Investing NOW

Doesn’t it seem like everywhere you look, whether it’s on investing blogs or flipping on CNBC, they expect you to hit the ground running like a Warren Buffett!

It’s easy to get overwhelmed and you end up not starting on that investing journey that’s going to set you financially free!

I did a poll of the group last year and found one-in-five of our Bow Tie citizens haven’t started investing yet and half have only just started.

We’re going to change that right now. I want to get every single one of you started investing and making money. In this video, we’ll cover the most important investing questions for beginners at every step of the way to get started. Every question you have about how to start investing, we’ll cover it here and then, I’m going to tie it all together with a step-by-step strategy you can use to make a $3,000 monthly income on just 15 years of investing and from small investments, so stick around for that!

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How Much Should You Invest when Starting?

How much should I invest? It’s one of the most common questions I get about starting investing, and the one I think keeps most people from getting started.

And the best…and the worst answer here is just invest what you can. I know it’s not the easy answer you want but it’s the truth! I’ll show you how to plan your finances around investing next but there is no set rule for how much to invest.

In our step-by-step later in the video, I’ll show you how to turn $150 or $300 a month into $3,000 monthly income but that’s not a rule and might not work for you.

Yeah, you’ll hear things like invest 10% of your income or calculators telling you how much you need to invest but they all leave out a crucial detail…you! Your own income and budget are going to determine how much to invest each month.

So figure out what’s left in the budget after paying those must-pay expenses. I would recommend starting with investing at least $100 or $150 a month but if you can’t do that, start with $50 a month.

What’s important here, and I probably should have led with this, is that you get started investing. You start building that habit of putting money in stocks, no matter how much, whether it’s $250 a month or twenty-five bucks.

Once you build that habit, then you can worry about whether you’re investing enough to meet your goals but I want you to get into that habit first.

Get a FREE share of stock worth up to $1,600 when you open a Webull investing account – learn more here.

How to Get Your Finances Ready to Invest

Next here, it is critically important that you get ready to invest and this is something most investors fail to do.

What I’m talking about here is getting your finances ready for you to start investing because it’s one of the most heartbreaking things to see and it happens all the time, but I see people start investing, they’re motivated and their portfolio is growing, then something happens and they have to withdraw that money!

It is so demotivating, having to start back at zero and a lot of people just give up. They never get back to investing and it just ruins their lives.

So a few recommendations here to get your finances ready to invest. First is you need at least a month’s worth of expenses tucked away in savings. Now I know most people will tell you to save three- to six-months’ of emergency expenses and I’d say three months is a good target but I don’t want you saving forever before you start investing.

The important point is you have some what-if money in savings so you never have to withdraw on your investments.

Next is if you can’t scratch together at least $150 to invest each month, it’s time to take a hard look at your budget and your income. That’s something most people don’t think about, that income side of the equation. Yeah, most can usually find an extra fifty or so in the budget to invest but sometimes you just gotta realize, you need to make more money.

But as you’re planning here, I also want you to not be investing every dime, sacrificing everything and being miserable. I fell into that trap in my 20s. I was saving every penny, working two jobs and managing my rentals. I was livin’ on Ramen noodles and having zero fun, just so I could invest more.

The problem is, I would burn out every six months or so and go on a shopping spree. I’d set myself back two steps and it was because I didn’t have a plan for what I could realistically invest and still be happy now.

So take that look at your budget, set an amount to invest that can get you to your goals but will also leave some room for enjoying life!

What Should I Invest in?

Now you’re ready to start investing…but what do you invest in? You’ve got the money, what do you put it in for that maximum return?

First off, I’m going to reveal the greatest lie of investing, that it’s all about picking stocks. In fact, investing is much more about that regular amount you invest and watching it grow over 10 or 20 years. So don’t stress out so much about picking the right stocks.

The best strategy for your investment dollars, and this is the one I use with my own portfolio, is called the core-satellite approach. The strategy is called core-satellite because you have a core of investments that make up between 60 to 75 percent of your portfolio.

These are in exchange traded funds, ETFs. For example, you might have 15% of your money in the Vanguard Real Estate Fund, ticker VNQ, which holds shares of companies in the real estate sector. Maybe you hold another 10% of your money in the Vanguard Long-Term Bond ETF, ticker BLV, which invests in hundreds of bonds and pays a 3.3% dividend. Finally, maybe you hold another 50% of your portfolio in a few funds like the ProShares S&P 500 Dividend Aristocrats ETF, ticker NOBL, a fund of the best dividend stocks in the market.

So by investing most of your money, that core sixty- to seventy-five percent in three to five funds, you get instant diversification across stocks, bonds and real estate. You money is spread out across hundreds of stocks, you’ve got bonds in the bond fund and cash flow from the real estate fund.

Then with that satellite portion of your portfolio, the remaining 25% or so of your money, you invest in individual companies that you really think could produce those higher returns.

The beauty of this core-satellite strategy though is that because you only have that 25% of your money to invest in these individual stocks, and say you invest three- to five-percent of it in each stock, that means you’re only picking maybe eight to ten individual stocks. So instead of having to find 20 or 30 stocks, doing the hours of analysis on each one and keeping up-to-date on each one, you only need a handful of winners.

This is going to cut in half the amount of time you spend looking for stocks to buy and following your investments. You don’t have to worry about those three to five funds you hold. They’re diversified across a group of stocks, bonds or real estate so they’ll be getting that average return on the investment.

Where to Start Investing?

OK, you have an idea of the stocks you want to buy, now where? Which is the best online app for beginner investors?

There are a million and one investing platforms but honestly, they’re all pretty much the same. There are three things you want to look for here and then I’ll share which platforms I use.

First, you want to look for an investing site that doesn’t charge you to buy stocks. When I started investing in 1999, Brown & Company disrupted the industry by being one of the first low-cost brokers at $5 a trade but even that’s too much anymore. Most of the major brokers and investing apps have gone commission free.

It’s also nice to use a site that let’s to invest in fractional shares. That means you can invest any amount of money in a stock, no matter what the stock price is at. You can invest $50 in shares of Amazon and instead of having to buy a full share for $3,000…the site will just split up a share and you’ll get that fifty-dollars’ worth.

Third here is look for a platform that gives you the investing tools and research you need to invest. Now this one isn’t nearly as important as the other two and some investors, especially beginners might not even need any research tools.

The trick though, when you’re picking where to invest, is there’s nothing wrong with having more than one investing account. In fact, between retirement and regular accounts, I have nine accounts on six different investing apps. I use ETrade and Merrill Lynch for research. Webull and M1 Finance for investing because of that commission-free trading and I also have accounts on Ally and Fundrise.

It’s free to open an account and a lot of times, you’ll get a bonus like free shares or cash when you deposit like with Webull if you use the link below.

Get a FREE share of stock worth up to $1,600 when you open a Webull investing account – learn more here.

How Should You Start a Portfolio?

Another great question I get from beginner investors all the time, How do I start a portfolio?

You’ve got the money to invest, you have an idea of the stocks and funds you want to buy and the investing site…now the question is, do you buy them all at once with just a little in each or do you invest everything in one stock each month?

And I would definitely recommend buying all your stocks at once, putting a little in each, then adding to them each month.

The reason here is if you buy just one stock a month, putting all your money into it, there’s going to be a long time where you have a lot of risk in just one or a few companies. For example, even if you’re planning on investing in just 15 stocks or funds, for six months you’ve got all your money in just a handful of them.

That is a HUGE amount of risk. Think about it. If you’ve got just six stocks, that’s 17% of your money in each. Now let’s say two of those stocks fall hard on some bad news, each losing a third of their value. Because you had so much in these two stocks, your portfolio is now down over 11% and that’s if all the other stocks are holding steady.

But if you had started your portfolio with all 15 stocks, then you’d only have about 7% in each. That same drop in two of those stocks would hurt, but your portfolio would only be down 4% on it…not nearly the same level of pain.

Again, this is where using an investing app that allows fractional shares comes in handy because you can invest your money each month across all those stocks in your portfolio. You don’t have to worry about buying at least a whole share in each, you just invest $50 in this one and $50 in that one and so on.

How do You Buy a Stock?

OK, we’re down to actually investing, putting your money down to buy a stock and this is going to be surprisingly easy.

I’ll show you how to buy a stock on ETrade here but the process is almost identical on most apps. We’re here in one of my accounts and let’s say I want to buy shares of everyone’s favorite Tesla. Now if you don’t know the abbreviated ticker symbol, you can just type in the company name and a drop-down will show you the ticker.

Here on the stock’s profile page, you’ll see all the basics like price, market cap, the 52-week range of prices and then across the top here, you can see a bigger chart, recent news and options trading. Let’s say I’ve already done my research and want to buy the shares, so I click buy over here.

This order page is almost identical on any platform. You see the bid price of the shares which is the highest price an investor in the market is offering to buy and here the ask price is the lowest an investor is willing to sell the shares for in the market right now.

These two prices get more important if you’re options trading because they can be much further apart. For most stocks though, this bid and ask price is going to be less than a few pennies difference and right around the quoted price for the shares.

In this action drop-down; you can buy, sell, sell short or buy to cover a stock. We’ll select buy and then put in how many shares we want.

Now if you’re on a platform that let’s you buy fractional shares, this will probably be a dollar amount, how much you want to invest rather than having to pick the number of shares.

For this price type, the majority of the time when you’re buying stocks, you can just pick this market order. That’s going to buy the shares immediately at the current market price. These other orders, like the limit order, are more for when there’s a large bid-ask spread and you need to tell the app at what price you want the shares. Again though, not really an issue for most stocks.

The platform automatically shows me the total cost of the trade and I’m ready to go.

How Many Stocks Should You Own?

Just two more questions here to start investing before I share that step-by-step plan and this is another really common question for beginners and even those investing a while, how many stocks should you own?

You get all these great investing ideas everyday online or on TV…it can get very easy to build a portfolio of hundreds of stocks. You just keep investing in everything!

But you really don’t need to. Research shows that once you get maybe 20 or 30 stocks, your overall return starts to look a lot like the average market return because you’re so diversified. You’ve got a little in everything.

It’s another reason I like that core-satellite strategy, having those three to five funds gives you all the diversification you need in the asset classes. Then you just pick 10 or 15 stocks of companies you really like, stocks you think can really do well.

The strategy spreads your risk around with the funds, those are going to get the market return but since you’ve got a little more in that small handful of stocks, you get the opportunity for higher returns. Just 10 to 15 stocks for that upside shot if a few of them really take off!

When Should You Sell a Stock?

A question every investor needs to ask eventually, when should I sell?

You’ve got your stocks, you’re investing every month…when do you take those profits and run?

The simple answer would be never. Just hold those three funds and 10 to 15 stocks you really like, maybe even 20 stocks, until you retire and start living on your investments.

But we all know it’s not as easy as that. Even long-term investors don’t hold their stocks that long. Sometimes you need to sell and you better know when that time comes.

First is if there’s a scandal or lawsuit and then no accountability by management. Hey, bad things happen to good companies and even the best run into problems sometimes but if management doesn’t step up and say, this was my fault, here’s what I’m doing to fix it…then I’m dumping the shares.

Another problem I watch for is the company piling on too much debt. I’ve just seen this become a problem too often in the past. Companies go on an acquisition spree, buying up everything they can and the fund it with mountains of debt.

Of course, those acquisitions never go as planned and the debt payments just become unsustainable. The dividend is cut and the share price plummets, so I want to be out before that happens.

The third signal is if the stock price just reaches where I think it should be. Whenever you’re investing, you need some kind of an estimate, whether it’s from analyst targets or your own, of how much that stock is worth.

And I wouldn’t necessarily sell a stock as soon as it reaches that target but if it goes much higher, I’m looking for something with a little more room for return.

Simple Step-by-Step Strategy to Start Investing

So now you’ve got a roadmap to start investing! Now though, I had an idea I wanted to share. It’s a step-by-step strategy to start investing and give you an extra $3,000 or more each month from your investments.

Understand, this is just a general plan. I’ve suggested amounts to invest here so anyone can get started investing but if you can invest more, you’ll be able to reap those benefits even faster!

Here’s the plan. You start that first year investing just $150 a month, following the outline we went through in this video. That first year, you’re just getting used to investing, putting money away and watching it grow.

I started you off slow in that first year to make sure everyone can get started. This second year, we’re going to increase that monthly amount to $300 so you’ve got a whole year to play with your budget and income so you have that money available.

We’re going to be doing this for three years, $300 a month, and this is to build that rock-solid habit of investing every month. Most of your investments here can be in riskier stocks like tech and communication services for that higher return. You’ve got more than a decade to let them run so it’s a great time to take that risk here.

This is also a runway though. You’ve got three years of investing $300 a month but then we’re increasing it to $500 to really start building your wealth. So in that three years, that’s a perfect time to start building up your income sources, maybe start some of the passive income sources we talk about on the channel, so you’re ready to invest $500 a month starting in year four.

By the time that comes, year four, you’ve got the habit and the cash, now it’s just a matter of putting it to work. At a modest 10% annual return here, you’ve seen your portfolio rise to over $20,000 and you can really start to see it grow.

You’re going to do this for five years and I guarantee, after the first year, it’s going to be like second-nature. You won’t even miss that $500 a month.

By year ten, you’ve got more than $80,000 in your investments and we’re going to do our last increase here. For the next five years, you’re going to invest $650 a month. Stick with it, find the cash to invest because this is the last five years you’re going to have to put money away!

And here, maybe you start pulling back on some of the risk in those new investments. Start buying cash flow investments like real estate stocks and dividend stocks.

Now these investment ideas here are just that, ideas. I’ve tried to start you off with a little more risk in those early years but then suggest a little less as you get older. Basically, you’re front-loading your returns when you can stand the risk and then protecting your money later but always hold a diversified portfolio and use that strategy we talked about earlier in the video.

After that five years investing $650 a month, that’s it! That’s all you need to produce the $3,000 a month income when you retire and I’ll show you that in a minute. Feel free to keep investing here for more income or just enjoy the extra money each money.

Here you might have more of your investments in safer sectors like utilities and consumer staples to make sure the money is there when you need it, but at this point, you can sit back and watch your wealth grow!

And after just 15 years of investing, less than the time it took to hit puberty for some of ya, you’ve invested about $87,000 and will eventually see it grow to three-quarters of a million dollars!

That’s $750,000 and you can safely withdraw about 5% of that a year, letting the rest grow. That’s going to produce $37,500 a year… more than three thousand dollars a month for the rest of your life. And that’s if you stuck to this modest plan to start investing, just starting with $150 a month. Most of you hard-chargers out there, you’re going to have more you can invest every month and you’re going to build a bigger portfolio!

Get a FREE share of stock worth up to $1,600 when you open a Webull investing account – learn more here.

It can be that simple to start investing and 2021 is the year you make it happen! Don’t make investing in stocks any more complicated than it already is and use a simple strategy to get started.

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