Breaking Down Barriers to Investing
Growing up with immigrant parents who lived through economic insecurity taught me the importance of being frugal. My dad, one of the most financially savvy people I know, was burned by the market downturn in 2001, which made me wary of investing in the stock market. I thought it was only for the rich or extremely knowledgeable. However, two things changed my mind: Helaine Olen’s book “The Index Card” and reading perspectives from people my age on TFD.
Demystifying Investing
Olen’s book showed me that personal finance, including investing, doesn’t have to be scary or complicated. The financial service industry profits from making people believe they can’t handle investing alone. Olen’s straightforward investment strategy gave me the confidence to start investing. Reading about others who invested without a lot of money or expertise also inspired me to take the leap.
My 7-Step Journey to Investing
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Opening a 401K: I started by opening a 401K, mainly because my company offered a 7% match if I invested 1%. I didn’t know much about numbers, but I was excited to be an “official investor.” Initially, I contributed 1% of my salary, but after realizing I could qualify for a tax credit, I increased my contributions to 10%.
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Trying Out Acorns: I used Acorns, an app that invests small amounts from my purchases into low-cost ETFs. This was a low-risk way to get started with investing, and I barely missed the small amounts being transferred.
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Opening a Brokerage Account: After gaining confidence, I opened a brokerage account with Charles Schwab, which has no minimum balance, excellent customer service, and low fees. I funded my account with a tax refund and set up automatic deductions from my paycheck.
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Investing in a Diversified Portfolio: I invested in a mix of low-cost ETFs that track entire markets or indexes, such as the S&P 500. This diversification helps offset potential losses in one sector with gains in others.
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Not Putting All My Eggs in One Basket: Instead of investing in a single “blue-chip” stock, I spread my investments across multiple ETFs. This approach reduces risk and allows me to ride out market fluctuations.
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Embracing a “Set-It-and-Forget-It” Attitude: Research shows that investors who leave their portfolios alone tend to perform better over time. I’ve adopted a laid-back approach, only checking my accounts occasionally and focusing on long-term growth.
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Re-Evaluating and Improving: As I learn more, I rebalance my portfolio to ensure it aligns with my goals. For instance, I realized my initial 401K investments were too conservative and high-fee, so I adjusted my strategy to optimize my returns.
The Power of Investing
By taking control of my investments, I’ve given myself a chance at a more secure financial future. I’m harnessing the power of compound interest to build wealth over time. Investing may seem daunting, but by starting small and being patient, anyone can take the first step towards financial freedom.
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