You’ve always heard investing is a smart money move, but if you don’t have a background in finance, it might feel a bit overwhelming. There’s all those terms and acronyms, and don’t you have to keep an eye on your stocks, like, every hour?
If you’re wondering how to start investing, know it doesn’t have to be that complicated. In fact, there are a number of apps out there that guide you painlessly through the process, including iBillionaire.
Before diving too deep, though, let’s start with the basics.
Why Start Investing?
Think about your money. Where is it?
If it’s in a checking account, it’s probably sitting stagnant, not earning you a whole lot of interest — if any. These days, interest rates on checking accounts with traditional banks are about 0.04% APY, according to Value Penguin.
You might have some of your money stashed into a savings account, so you could be earning a little more interest on it each year. Still, it’s not a lot. The average interest rates on savings accounts is around 0.08% APY, according to Go Banking Rates.
If you want to make your money work harder for you, consider long-term investing. Put your money in investments, and you’ll typically see higher, better returns than your savings account. Why? The risk is higher. If the market crashes tomorrow, you could be out some money. However, the key is to invest long term, riding out those natural ups and downs.
Take note from investing guru Warren Buffett. His best advice? Invest now. Trust the system.
“If you buy it for $10, $20, just keep buying the S&P 500 index and forget about all the other nonsense that’s being sold to you because I’ll guarantee you one thing about the stuff being sold to you, it will carry bigger fees than what I’m talking about… America is a powerful economic machine that, since 1776, it’s worked and it’s gonna keep working.” — Warren Buffett
(The S&P 500, by the way, stands for Standard and Poor’s 500. Like the Dow Jones, it’s a stock market index, but it tracks 500 of the largest U.S. stocks. More on stocks later.)
Plus, investing allows you to capitalize on the power of compound interest. You can reinvest your dividends, or earnings, and earn more money on top on your initial investment. It’s the No. 1 reason you should start investing early. Double a penny each day for 31 days, and you could have more than $21 million to your name, all thanks to compound interest.
So if you’re wondering when to start investing… the time is now! Put that compound interest to work for you as soon as possible.
How to Start Investing
There are a number of ways you can invest your money. No, you don’t need a huge stack of cash. There are ways to start investing for beginners with little cash — even $5.
Here’s a rundown of some of the most popular ways for beginners to invest:
- Invest in stocks: Stocks are shares of a company. For example, you can buy a share of Amazon for something like $1,800 these days (or a fractional share, for as little as $5). This means you own part of the company, and your stock value reflects the performance of the company.
- Invest in bonds: When you invest in bonds, you’re basically loaning a company or a government money. The borrower then pays back the loan, ideally, by the maturity date — with interest. Traditionally, bonds aren’t as profitable as stocks; however, they carry less risk.
- Invest in mutual funds: A mutual fund is a pool of money (investments in stocks or bonds, for example) that’s been collected from a number of investors on mutually agreed upon terms. The mutual fund is then overlooked by a professional investment manager, who attempts to get the most capital gains for the fund’s investors.
- Invest in exchange-traded funds (ETFs): ETFs are a great way to start investing. An ETF is basically a basket of company stocks and/or bonds that center around a theme. It trades like traditional stocks on a stock exchange. Because you’re not risking it all with one company, the barrier to entry is lower as is the risk. It’s worth mentioning that, at iBillionaire, they make a new version of ETF themselves with more diversification (so, more risk) amongst 10-15 companies, whereas ETFs have up to hundreds or thousands, and at a minimum 16. The difference is the risk and diversification, and that there is no added expense ratio. They are called iBTFs and they are another investment option to consider!
Now, if you’re wondering how to invest in stocks, bonds, mutual funds or ETFs, you’ll need to decide on how you want to manage those investments. You can invest the money yourself, go through a brokerage firm, contact an investment adviser or use a robo-adviser.
If you’re just getting started with a smaller amount of money, we suggest avoiding the high fees of an investment manager and taking a DIY approach. Robo-advisers and investing apps are great alternatives.
You’ll find there are a ton of options out there — all claiming to be the “best investment app” — but a great place to start is with iBillionaire. It’s a low-cost tool that allows you to, well, invest like a billionaire. But you only need $5 to get started.
How to Start Investing on iBillionaire
iBillionaire is an app, so you can keep your investments at your fingertips. Plus, it’s a free download. Nothing to lose.
Once you open the app, open an account and select your investments.
There are three main types investments you can invest through iBillionaire. Here’s a quick rundown:
- Invest like a billionaire: Want to invest like Buffett? You can invest in Warren Buffett’s investments for as little as $100. Follow in the steps of other billionaires, too, including Carl Icahn and Bill Ackman.
- Invest in strategies: Want to invest in your interests? Tap “Strategies” to find a number of iBTFs (iBillionaire’s version of ETFs), including marijuana industry stocks, FinTech companies, and health and fitness. You can also invest based on your risk through this method. A typical rule of thumb? The younger you are, the more risk you can afford. Invest in Conservative, Moderate and Growth pre-made diversified portfolios. All the work’s been done for you. For example, here’s a breakdown of iBillionaire’s pre-made Moderate Strategy iBTF:
- Invest in stocks: If you’d rather set your sights on one company, you can buy pieces of stock starting, once again, at $5. Current top contenders include Square, Amazon, Netflix and Apple.
Then, you can invest one-time, or set up automatic investments. Auto investing is great for beginners because you invest a smaller amount that you can afford at regular intervals, rather than larger sums sporadically. Automatically, you buy more when the market is down, and less when the market is up. Dollar cost averaging via automatic investments is a simple way to take emotions out of investment decisions, and stick to a long-term strategy.
Once you start investing, you’ll pay a $1 monthly fee. Once your account hits $3,000, you’ll pay a 0.65% yearly fee. On a $3,000 balance, that’s less than $20 a year — equivalent to about two months worth of Netflix.
Want more step-by-step details? Check out our FAQ page.
Ready to dive in and invest like a billionaire? Download the free iBillionaire app to check out your investing options.