Investing Your First Dollar

“Do Something Today That Your Future Self Will Thank You For.”

So you finally have a bit of money and you have decided to take control of your financial life. Good for you! You realize it is time to begin investing, and you are willing to think about the long term – weeks, months and years – and not just today. You are willing to be patient. And you want to take steps now to benefit your future self.

Let’s say you have $10,000 available to invest. But investing is new to you and you are not exactly sure what first step to take. It can be intimidating to think about making decisions about the entire $10,000.

Before you do anything else, here is a practical way to get started. First, learn a bit about your different options. You can reference blog posts such as Mr. Money Mustache to understand investment trade-offs. After that, begin building your investment portfolio. This is a plan for how you will invest your first dollar (and each subsequent dollar).

You might decide to set some rules for yourself that look like this:

  1. Invest no more than 8% of the total into any one stock (N.B. could also be an index fund). This means a maximum of $800 in each company or fund.

  2. You now know you have $800 to invest into any one company or fund. Decide that you will buy shares of any company or fund on two separate occasions: first purchase for $400 worth of stock or fund and later, purchase another $400 worth of stock or fund (these can be at different prices).

  3. Eventually you have will have a handful of positions in your portfolio – each with about $800 invested.

  4. If you’re going to buy stocks, purchase positions in companies in at least 5 different industries. You should understand what these companies do. Like shopping at Target? Look into buying that stock. Remember, as an example, you should not put all of your money into oil companies - spread your purchases around. Diversification is key.

  5. Don’t be afraid to hold cash – be patient for opportunities to arise.

Now you have a plan, and instead of thinking about investing your all-important $10,000, you are looking for your first investment for $400. And then the next for $400, and then the next, etc.

And that gives you an investing outline that your future self will thank you for.

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