New to Investing
Don’t let getting started feel overwhelming
Maybe you’ve inherited some money from a relative. Maybe you’re at the point in your career where you have some disposable income that wasn’t there before. Maybe you realized the longer you wait to start investing, the more difficult it is going to be to retire. Whatever the reason, you’re reading this because you want to get started investing and, perhaps, because it seems a little bit overwhelming. Remember the first time you tried to ride a bicycle, play chess or cook a meal? It probably felt the same way, so let’s just take it step by step and get started.
What’s your budget?
Even if you’re lucking enough to be investing some inherited money, it’s probably a good idea to take a look at your budget. How much money are you making? Are you paid weekly, bi-weekly, monthly? What are you spending? Start with what you absolutely need to spend. These expenses are things like rent or mortgage payments, necessary transportation costs, food, utilities, health care, etc. Also be honest about spending on items that are not necessary. Sure, many of these items are quite reasonable like buying a sandwich for lunch instead of making it at home and bringing it to work. You’ll probably also find items more frivolous in nature, like yet another pair of designer sneakers or multiple $8 lattes a day. The whole point here is to understand how money is coming in and how money is going out. If you’re lucky, you’ll realize there are items you’re buying that you could entirely do without. If so, at least consider the possibility that this money could be used to increase your investing budget.
Determine your net worth
Figure out what items of value you own. This could be your house, rental properties, car, money you have on hand or in the bank, your 401(k), your IRA, stocks, bonds, certificates of deposit, etc. Don’t worry about the minor things like your silverware set or your favorite chair from Ikea. Just determine the major items of value. These items are your assets. Also figure out what you owe. This could be your mortgage, the loan on your car, your student loans, etc. Again, these are the big things and not the $5 you owe your friend. These debts are your liabilities. Your net worth is simply the value of your assets minus the value of your liabilities. Use a spreadsheet or otherwise keep track of your assets, liabilities and net worth. This isn’t something you need to track daily. Do it once a year and notice how the values change over time.
Worth the effort
It’s a fair amount of work, but this is how you determine your financial big picture. With this information you will be able to make better investment decisions tailored to your specific situation.
Latest Market Insights
Quarterly Outlook Q3 2022: The Runaway Train
- Central banks' attempts to kill inflation is a paradigm shift, which could end in a deep recession.
Tangible assets and profitable growth are the winnersWith US equities officially in a bear market, the big question is where and when is the bottom in the current drawdown?
Understanding the lack of investment appetite among oil majorsThe everything rally seen in recent quarters has become more uneven, as its strength is driven by commodities in short supply.
The pressure is on as the wind leaves the sailsWith cryptocurrencies in sharp decline, are we entering a crypto winter or is the bear market a healthy clean-up of the crypto space?
Why the Fed can never catch up and what turns the US dollar lower?Many other central banks are set to eventually outpace the Fed in hiking rates, taking their real interest rates to levels higher than the Fed will achieve.
Bank of Japan: Swimming against the tideThe Japanese economy has gone from the age of deflation to rapidly rising prices in no time, leaving the Bank of Japan in a pickle.
Green transformation detour and bear market hibernationWith the impending risk of global econonomic derailment, we share the five things investors need to consider in this new half year.
Crisis redux for the eurozone?Whether there's going to be a recession in Europe or not, the path towards a stable economy will be agonizing.
Technical Outlook: Gold, Oil and a remarkable multi-decade perspective on EquitiesThe Nasdaq bubble pattern, USDJPY resistance, crude oil uptrend losing steam and the technical outlook for USD.
China: the train of new development paradigm left the station two years agoChina is transiting to a new development paradigm, as they are hit by deteriorating terms of trade, a slower global economy and an uncertain future while continuing attempts to contain the pandemic.