✨ HOW TO BECOME A WEALTHY MIDDLE AGED MAN✨
PT.2: Overview to understanding different saving/retirement methods, investments, and forms of income
Pt. 2.2 Overview of Investments
Welcome lovelies to (what I hope will be) a helpful series on gaining wealth and becoming financially literate and independent!
Disclaimer: Check other posts. It's too long to keep typing out.
Now comes (what I believe) is the fun part of money. Making it grow.
Investments are defined as “an asset or item acquired with the goal of generating income or appreciation.” Essentially, anything you purchase with the belief that in time it will be worth more. This includes the entire stock market, cryptocurrencies, art, real estate, jewelry, vintage coins, designer bags, etc. Of course, some of these take more time and each comes with some amount of risk. These variables change according to your strategy as an investor.
Do not overwhelm yourself during your financial literacy journey by trying to learn everything, all at once, while also trying it all out. The thing that creates the most confusion when learning is believing the lie that you can multitask well. Yes, start with a brief overview of the systems and institutions (what we are currently doing in the series) but literally all you need to start is definitions and a gist so that you can comprehend how they connect later on. Learning an entire world that has never been taught to you is going to take time, and I’m talking years. And then, when you think you have something down your going to mess up or read an article about how the stock you saw yesterday for $6 is now $1000 and you’re going to be frustrated (this happens a lot). But, If you want to learn about the stock market, focus on the stock market. Retirement still scares you, focus on that until you master it and have a plan. And for Christ’s (or whatever deity/person/universe you believe in) if you do not have a steady stream of income do not put your last pennies trying to get into crypto (or any investing truly). This is something to start after you have income, a savings, a retirement, and have paid off at least most debts.
Recommended sources to learn more:
Netflix has a great series called “Explained” where (you guessed it) they explain things. While I recommend every episode because you can never learn too much, there are ones specifically dedicated to the stock market, cryptocurrencies, and billionaires each that helps to uncomplicate the history and purpose of each of these things.
“Stock markets are real and electronic exchanges that enable the buying and selling of securities. The most popular include the NYSE, Nasdaq MarketSite, and Tokyo Stock Exchange.” Let me, let you, in on a little secret-the stock market is essentially fantasy football (sorry, my American is showing) but with companies. When you buy a security, you are betting that (in the long run or short run, depending on your strategy) that a certain company will perform well and gain profits, which in turn will gain you money on what you bet. There are two categories of players in the market which include the assets (the football players) and the investors (the betting public). Of the assets you can categorize further by what position they play on the field…
Most well-known, but the riskiest. The “star” player that everyone hypes up and takes all the credit. Stocks are fractional pieces of publicly traded companies, and by buying a stock you own a relative size of that company. They are either “paying you” through growth (when their stock price rises) or through dividends (when they send you a piece of their profits directly).
Less known but a safer bet than single stocks. Popular among those in middle age. “Mutual funds are baskets of stocks or bonds. They come in all different shapes and sizes, from covering broad stock market indexes to focusing on specific sectors.” When you buy a mutual fund, you are saying that you believe on average that pile of stocks/bonds are going to do well, instead of betting on a single player. Usually they are actively managed by people who are trying to “beat” the market for you. Statistically good for the short term, long term are less effective than ETFs.
Index Funds: a subset of mutual funds that are passively managed and track indexes like an ETF but trade like a mutual fund (once at the end of the day and without reliance of supply and demand)
Exchange traded funds. The up-and-coming underdog that’s gaining popularity. These are passively managed baskets of stocks and bonds that track over a specific index like the S&P 500. They work like stocks, being traded throughout the day, relying on supply and demand, while giving a lot of the advantages that mutual funds do. They also come with their own set of disadvantages but are still a great way to diversify a portfolio inexpensively.
The reliable bench players you know you can put in to save a game. Great safe bets that can generate a steady income. Bonds work like a loan for a regular person, except for a company. You can loan your money to a company which will pay you a principal plus a fixed interest back every specified period. There are different types which come with different advantages and strategies, so make sure to read the fine print.
Tangible goods that go into manufacturing-Gold, oil, metals, corn, soybeans, etc. A good defensive team to have in the game for a hedge against inflation or economic troubles. They trade in a commodity exchange. You can still access them through most brokers.
Source to look into for deeper understanding and questions: https://www.investopedia.com/terms/i/investment.asp
Easy way to get started quickly:
1. Create a brokerage account: There are lots of accounts to choose from, but I would go for accounts that have zero fees and no minimum, this is starting to become the norm but once upon a time you had to give a minimum investment of $5000 to get started. I personally use Charles Schwab and Robinhood. I love all of the tools and accounts Schwab has and Robinhood is just easy to use.
2. Sign up: this may take a day or two to finalize, especially with banks but it shouldn’t be a big deal
3. Connect a card or account to transfer funds
4. Buy your first security: I would start off with simply looking up beginner investments on google. I recommend either an ETF, index fund, or choose a company that you have an interest in because you will be more likely to keep up on their news
5. Tip: think long term as a beginner. Sure, once you start learning and understanding you can change your strategy to gain more in a shorter time, but this comes with much more risk. Do not be an idiot and sell all of your stock when you see your investment plummet nor sell as soon as you see it go up a little. The best advice for a beginner: Buy a stock and leave it alone (for YEARS)
There are many ways to invest in real estate-you can buy a property, you can invest in a property fund, you can become a landlord,or you can flip a property. Again, depending on the strategy, will change the risk and reward you have taken on. All of these options are usually on the more cash heavy side but can reap a lot of rewards if done right.
https://www.nerdwallet.com/article/investing/5-ways-to-invest-in-real-estate
Easy way to get started quickly:
1. Buy a real estate ETF or fund, you can just look this up on google or through your brokerage
2. OR you could look into buying a property near you and renting it out if you have that much cash (Make sure to do your research, this can get pretty complicated)
Also considered property but until recently it was incredibly hard to invest in art without significant cash and contacts available. Now, there are platforms like Masterworks where you can buy a fraction of a piece like a stock of Monet and you get the rise in appreciation. However, it still is for those with money already available, I believe you have to invest a minimum of $2500 to get started on MW.
Sources to look into: https://www.investopedia.com/articles/pf/08/fine-art.asp
Cryptocurrencies are digital currencies that are not backed by real or tangible assets or goods, but on the trust and value of the people that use them, and supply and demand. They can be traded like stocks on an exchange and are tracked with a digital ledger on the blockchain. The first cryptocurrency was Bitcoin and the rest that have followed are categorized as altcoins (alternative coins).
The stage of cryptocurrencies we are in is likened to the early 90s with the internet. Not a lot people truly understand the blockchain (the vast ledger space which contains every transaction made securely in encrypted “blocks” that are then “chained” together so that if one block is compromised the whole chain shuts it down.) It is decentralized and written simultaneously on thousands of super computers. The beauty of it is that if one ledger on one computer is somehow hacked or wrong the rest of the computers storing the ledger interrupt and either fix it or shut it down. A way to understand it is blockchain is to the internet as bitcoin is to a website, but the internet runs off people trusting the system, blockchain runs off trusting no one.
The currencies that run on blockchain can have a multitude of purposes, but bitcoin was really just the starting solution to fix the problem of trust on the internet. People wanted a secure, anonymous, untraceable way to spend money online, like cash is in the real world. And while for the most part it is just that, it isn’t completely anonymous. Like in the real world if you buy something from Mcd*nalds with cash that transaction is still recorded in their system and through a receipt. Your crypto transactions are recorded in the blockchain, but most people don’t even know how to access the ledger so for now any ill*cit purchases you make are pretty safe.
I HIGHLY recommend looking into a cryptocurrency course or training just because there is so much that goes into it and lots of details that can help you. This investment is incredibly risky and volatile! I only would suggest investing an amount you are completely comfortable to lose ALL of.
https://www.investopedia.com/cryptocurrency-4427699
Easy to get started quickly (Please dear lord do your research first):
1. Sign up on a crypto exchange like Coinbase or Binance, some brokers (like Robinhood) also allow you to trade crypto but it’s a very limited selection
2. Do lots of research!! (I’m going to say it until you get it, and I don’t think you get it yet)
3. Think of it like stocks, if you read up on the coin and its purpose, and think that it’s going to be useful soon or in the future, then invest
4. Tip: the crypto market moves MUCH faster than the stock market and is much more sensitive. In just these last few days (literally hours) bitcoin was trading at $40,000+, the following day, for whatever reason (people got scared, people wanted to sell to get profits, etc.) it will barely hold $33,000. So, invest wisely!
This is very brief list of the main investments. There is still a lot of depth each of these goes into and especially with things like crypto, information changes 24/7. I hope you have learned by now that you should be continually learning as well. Instead of spending your morning looking at your Instagram feed of bum friends, dusty men, and “models” spend it reading the paper and catching up on the market. Follow investors and billionaires like you follow celebrities and see how much smarter you become. At the end of the day winners focus on winning, losers focus on winners.
