Fellow humans,
Have you begun your investing journey? If not, no worries, today’s post is for you. I’ll breakdown how to approach your first investment. Keep in mind — my way is only one way, and I encourage you find your own way to best serve yourself.
I’m writing under my own personal belief that everybody should be an investor. If you’re reading this post, then you have internet access, so unless you’re too young to legally invest, you should take advantage of being your own broker.
1) Where to begin?
Ironically, the best place to begin is by making your first investment. You might think this should be the final step, and it might be for some people, but if you wait too long, you might get cold feet by finding another excuse to procrastinate.
Whether you risk $2 or $200 doesn’t matter much. Having any amount of your money in the mix is a good way for you to devote yourself to further education. You’ll be curious to know why the market value of your investment is fluctuating.
You might be questioning my logic — how are you supposed to have skin in the game when you haven’t decided which investment to choose? Be real, there’s at least one investment you’ve been interested in for a while. Pull the trigger?
Worst-case scenario, you lose $5 and learn a lesson. Best-case scenario, you watch your money grow while arming yourself with knowledge about money, investments, and how economies work. Risk/reward is favorable if you ask me.
2) RESEARCH
If I could overstate any strategy, then research would be the broken record. Knowledge is powerful. Knowing the right things at the right times will guide your decisions, like a quarterback observing the field during a play.
My first crypto investment was Litecoin in August 2017. Fast-forward to today, and I have no Litecoin. Research has taught me that Litecoin is conceptually pointless. In my opinion, Litecoin offers nothing unique to crypto.
Any benefit the Litecoin community claims can be matched and made better by another crypto project. The most popular claim is faster block times for faster transaction settlement. Bitcoin + Lightning, and mic drop.
By doing research, you’ll gain insight into what the investment offers, not only to you, but also the world. As you learn about different types of investments, you’ll understand what’s important to you, which leads my next point.
3) What are your goals?
Obviously, you’re investing for profits. Are you investing to claim your profits now, one year from now, or ten years from now? Whatever your answer might be, knowing your time-preference will help guide you.
For example, if you want to make money slowly but surely, gold should be one of your top choices. On the other hand, if you want to double your money in six months, then you shouldn’t even consider gold.
Historical charts can help you understand the potential volatility of an asset, but don’t expect history to repeat. Just because gold has grown relatively slowly in the past, doesn’t mean it’s guaranteed to continue growing slowly.
As you see above, gold was around $400 in 1993, and just under $2,000 today. Yes, this growth is significant and should not be overlooked. However, an asset growing 400% (5X) in 30 years is not very competitive. You can do better.
As you see above, the S&P 500, which “is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States” has grown 900% (10X) in the past 30 years. Much better, right?
I’ll quickly explain growth percentages for those who might not fully comprehend. Doubling your money is 100% growth. Tripling your money is 200% growth. Quadrupling is 300% growth, etc.
Every $1 invested into gold in 1993 would be $5 today. Every $1 invested into the S&P 500 in 1993 would be $10 today. As unfortunate as this may seem, you’ll need to do quite a bit of math and critical thinking during your investing journey.
Please understand the role of price charts. They are one piece of a large puzzle. Your research should also include doing deep dives on the fundamentals of the assets and industries. Anything you can learn about the asset, you should learn.
The more you know about an asset, the closer you will get to predicting the future of the asset’s market performance. You’ll never predict the future perfectly, but you can aim to get as close as possible.
Your research will either guide you closer to an asset, or tell you to walk away. Also take note, the markets can be poor indicators. During past bull markets, I’ve watched certain crypto assets (SHIB) grow beyond reason, then crash to reality.
I cannot possibly list enough resources to guide everybody, so I’ll refer you back to where we already are — the internet. Use the internet to your advantage. A lot of investment resources are free and credible. Books and podcasts are great too.
4) Trust your intuition.
Once you’ve done enough research on different assets, your instinct will guide you toward your favorites. Remember, you’re using your own money to invest, so invest however you want. Sometimes you’ve gotta take a leap of faith!
5) Choose reliable platforms.
You will be your own investment broker. Back in my grandfather’s day, he gave his money to a stock broker, then she bought the stock on his behalf. The internet has changed the game. You can buy assets from your phone.
There are plenty of reputable and reliable investment platforms. Again, use the internet and do your research to find a broker to fit your needs. See how many users they have, and check their reviews. None are perfect, but many work.
For crypto, I’ve used Coinbase, Strike, and Kraken, among many others. The key when buying crypto is deciding how much to store on the exchange, and how much to withdrawal to self-custody. Not your keys, not your coins.
For stocks, I’ve used USAA, Robinhood and eToro, but there are many others. First, I recommend checking with your bank, as they might offer stocks. For gold and silver, I’ve used JM Bullion, but there are others, such as in-person shops.
6) How much to buy?
Dollar-cost averaging (DCA) is the best strategy for a vast majority of the population. Most people are not sitting on $1,000+ of cash, so making a large purchase is not feasible. Many platforms allow micro-purchases as low as $1.
DCA simply means entering the market at many different price points over long periods of time. Buying $10 of bitcoin every 2 weeks is one example of DCA. Basically, put yourself on a buying schedule and stick with the plan.
The DCA process is nearly identical to having a long-term savings account.
Everybody’s situation and circumstances are unique. Generally, you shouldn’t ask others how much you should invest, because they don’t know your financial situation well enough, which leads to my final thoughts.
If you’re not already tracking your income, spending, expenses and debt, then you have some catching up to do. How will you know how much to invest if you don’t know how much money you have? Feel free to read the post below for help.
Until next time,
Salvatore Norge
P.S. — Although I won’t provide specific financial advice, I’m glad to help you understand something if you need the help, let me know.
“Keep falsehood and lies far from me; give me neither poverty nor riches, but give me only my daily bread. Otherwise, I may have too much and disown you and say, ‘Who is the Lord?’ Or I may become poor and steal, and so dishonor the name of my God.” -PROVERBS 30:8-9
I’m not very wise. Never financial advice. Do your research.