Hey everyone, thanks for joining me for this week’s Monday Money. I’m Josh, the guy behind this column. I’ve covered a bunch of topics here ranging from credit scores to credit cards to budgeting and more. There is one thing that I haven’t talked much about though, and that’s the topic of investing.
Truth be told, I’m 25 years old. I haven’t really done anything with investments until about a month ago. I was doing a review of Betterment for Modest Money, and I sold myself in the process. The main pitch for betterment is that it’s a smart way to invest for busy wannabe investors. As far as busy people go, I definitely fit in that category. Being a financial writer, I’ve always known that investing early is important, but I just didn’t have the time or money to try my hand at investing in a company or a business.
A little over a month ago, I wrote a Monday Money post that let you guys know that I was going to start investing. I got a lot of great feedback from the readers of that article, and on the 20th of last month, I decided to give it stock market investing a go.
Because I received a lot of great feedback about Betterment, I figured with what I learned, there’d be no better place to start. Opening the account was really fast. When I signed up, I filled out a short form, gave them information needed to verify my bank account, made my initial deposit, and set up automatic transfers to avoid the $3 monthly fee.
All was going well until the next day. In one day, I’d lost $0.37 of my $250.00 investment. It scared me because if I lost in the first day, I was sure to continue to lose. But, I figured it was only $250.00 and I could really test this program to see if it was good for my readers, friends and family. So, I kept the funds there and watched it closely.
Over the next week, my portfolio continued its downward motion. As I grew more and more concerned, I started thinking, “Well, that savings account with .1% interest looks really good right now!”. I was concerned that I wasn’t using the proper allocations so I played around with changing the allocation of my money in stocks and bonds. I started with the suggested 80/20 split being 80% bonds, 20% stocks. That wasn’t working. So, I went to 50/50. Still, I continued to lose. Finally, I went to a split of 26/74 with the vast majority of my money in stocks. Still, I lost. Now, 2 weeks had gone by and I was down almost a full dollar!
I figured I wasn’t losing much and decided to keep my investment going. I’m really glad I did too! The following weekend, my returns went way up! I mean, they jumped from the negative to the positive and continued growing from there. I started to think, “Well, maybe there is something to this after all!”. Now, my investments are up 2.7%, I’ve earned over six bucks, and I feel like I’m making the right decision by keeping money in the account and funding it monthly as I was planning to in the first place.
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Here Are The Things I’ve Learned So Far
You Can’t Watch Stocks Daily – Those first two weeks were scary. I’m sure it would’ve been worse if I had more money in the account, but even with a little bit in there, I felt like a loser. I was losing money! After a full month, I noticed that the trend seems to be down towards the end of the month and way up after the first week of the following month. I’ll let you know if that trend persists as I have more and more experience with my personal investment. Anyway, the main point is, if you watch your stocks on a daily basis, chances are, you’re going to suffer a concussion from beating your head against the wall too much in down times!
Allocation Matters – Because stocks have grown much faster than bonds, if I didn’t make the changes in allocation that I did, I wouldn’t have earned such a high return. Granted, I am taking a larger risk every time I put more into stocks by taking from bonds. The bottom line is, stocks are a risky investment, but they can really pay off.
Investing Makes Money, Saving Loses It – OK, so this one is a bit hard to explain, but I’ll do my best. When I have money in a savings account, it grows very little. As inflation happens, the growth of my money doesn’t keep up. As the value of my dollar goes down, if the amount of my dollars doesn’t go up, I lose!
Being that I’m investing now, I’ve done a bit of research on where my money is, my allocations and what I can expect in comparison to inflation. What I’ve found is that my money in my investments will grow faster than the value of my dollar will drop. That being said, I plan to take everything I have in savings and put it into Betterment. That way, I’m not losing money, day by day as prices go up!
What are your thoughts? Do you agree or disagree with my findings and why? Is there any advice that you could give to a young investor like me? Please provide your answers by leaving a comment below!