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How to invest: 8 of my favorite investing tips

November 1, 2015

How to invest:  8 of my favorite investing tips

 What does Netflix and chill have in common with investing?

Co-written post with Michael Ojo

It’s getting colder and whether you like it or not cuffing season is upon us. I know what you’re thinking. What in the world does investing have to do with Netflix and chill? After you’ve engaged in your share of Netflix and chill sessions, it’s time to decide where things are going. Nobody wants a “Complicated situation” you’re going to have to decide if you’re going to make it official or cut this person off. There also comes a point in your life where you’re going to have to decide am I going to invest or am I going to keep letting time pass me by without investing. I know investing can be scary, it sounds so complicated, but it doesn’t have to be.

There’s some things you need to handle before you make it official

Just like there are a few things you need to handle before you decide to make your Netflix and chill buddy official (maybe you had to cut off a few people, change your number, or clean up your social media accounts.), there are also some things you need to do before you start investing.

Build an emergency account

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It’s important to build an emergency account so you aren’t tempted to pull money from your investments in case you need cash. You don’t want to touch your investment money because the plan is to keep that growing for a long time. Remember think of investing as a longer term strategy, not a hit and quit method. You do not want to have to use your investment portfolio as an emergency fund. This is why it is imperative to know your risk tolerance and also create a separate emergency bank account.

Pay off your credit card debt.

TheStreet.com has some great advice when it comes to investing vs paying off debt. It’s a battle that I too once struggled with. If you’re not able to put much money towards your higher interest debts, it doesn’t make sense for you to start investing. I’m referring to debt like credit cards. I still have student loan debt, and I invest. It’s better to invest while you’re young and able to take advantage of compound interest. Think racks on racks on racks. *Having trouble knocking out your credit card debt? I’m sure my free financial workbook can help you. Download it here.

“If you have interest payments that are higher than 10%, you are almost certainly better off paying down debt than investing. The stock market has returned about 11% per year in the long-term ( far less if you consider taxes and fees), but there are no guarantees in stock investing. Your debt, however, is guaranteed — sometimes, even after bankruptcy. This only makes sense if your debts aren’t costing you much, in other words, if the interest rate that you’re paying is low.” TheStreet.com

Should I invest if I have student loan debt?

My student loan debt is higher than 10% and I still put money aside to invest. Why? Let’s say I have $38,000 worth of student loan debt. This is really how much student loan debt I graduated with, I currently have $21,000 left to pay  If I put all of my extra money towards my debt and didn’t invest until I paid off all my student loans I would have missed out on years of compound interest, appreciation,  and dividend payments.

Congrats you’ve decided to make things official.

You’ve been dating for a while now, You’ve decided that you’re in it for the long term. After a while if you’ve been dating someone they’ve made it past the cuffing stage. you see potential in them and you decide this is the person I want to spend my life with. Think the same way when it comes to investing in stocks. When you choose a stock that you think has potential, you need to be in it for the long term.

Marry your stocks

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You need to make a vow to your stocks. To have and to hold your stocks, from this day forward, for better, for worse, for richer, for poorer, in sickness and in health, to love and to cherish, till death do you part and then pass on your wealth to the next generation.

How do we know if a stock has potential?

I reached out to Michael Ojo to give us some tips on choosing a stock to invest in. Michael has a strong background investing in the real estate and stock market. Prior to founding two companies, an investment management company called Golden Door Asset Management, and a financial management consulting company, Michael was an analyst at Goldman Sachs and Dixon Advisory, covering several different investments:

 

There are a few key points to know if a company is investment worthy:

(1) The business Products or Services are well known and add value to the market

(2) The company has a good management team that is driving optimal performance results from all aspects of the company’s operations

(3) The financials of the company are in good standing order – meaning they are profitable, they do not have a lot of debt to repay, and they have a good amount of cash saved up in case they ever run into an emergency

For a new investor who is looking to get some stock in their investment portfolio

The first step is to start with companies you are familiar with and even companies that you have bought items or services from. Once you have thought of some of these companies, it is first vital to understand the company’s history, how long they have been in business, has there been any times where the company was close to being in trouble financially, how is the company competitive in the market, and who are some of their competitors?

If all these questions are answered and you still believe the company has potential then it is time to get more in-depth with your understanding of the company. Since the company is public you can easily go on their investor relations part of their website and look at investment information. One particular report you will need to get familiar with is the company’s 10K report, which is their annual report that tells you all about how the company is managing throughout the year and how profitable or unprofitable they are.

For more investment tips you can find Michael at www.goldendoorasset.com

These are all great points, Warren Buffet always tells people to only invest in what they understand. Every Time you buy a stock you are buying a piece of business or a share. So you want to make sure you do your research and make sure it’s a company that you believe and that will have prosperous returns to offer you such as stock appreciation and dividends.

How can we ease our mind of the fear of losing our money?

Love is a risk, and so is investing. Just like you may not always get along with your boyfriend or girlfriend, you may not always be happy with the way the stock market is performing. The market always goes up and down, sometimes making for a volatile relationship. It’s important to figure out your risk tolerance. Don’t listen to what the people on the TV are saying, there are often a lot of opinionated people who may or may not have done valid homework before giving you their opinion. Also remember that the people you hear on TV or on the radio, they’re   getting paid for their opinion, It’s a business.  Keep calm trust your gut, and make sure you do your homework on whom and where you receive your investment information from.

I hope you enjoyed this investing post. I think it’s super important to be able to build wealth. That’s really the new direction that Young Yet Wise is headed in. Building wealth, paying off debt and staying healthy. Confused by anything mentioned in this post? Don’t worry I got you.

Looking for a more in depth investing guide? I’ve got you covered. Pick up your copy of How to get started investing for beginners today.

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Special thanks to Michael Ojo for stopping by!

How to start investing

Sources:

http://www.thestreet.com/story/11748100/1/how-to-invest–ways-to-make-your-money-grow.html

 

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