Why do you want to get into the Share market, anyway?
Investing is a great idea for a lot of different reasons, but the best of these is that it literally puts your money to work for you. Let’s look at an example to show you the power of investing.
Starting smaller, let’s say you commit to making a $50 saving every week, and each time that the stash reaches $1,000 you put it into the share market. With modest interest rates of 9% a year, in 30 years you would have $442,000, but have only contributed $78,000 of your own money. See the power here? Compound interest has been referred to as the eighth wonder of the world!
The Impact of Inflation
Let’s look at another reason you likely want to start investing, inflation. Inflation depreciates the value of your cash every year.
Let’s consider an example to illustrate this:
Starting small again, if you put aside $100 and hid it under your mattress, and left it alone for 30 years, that same $100 would only be worth about what $40 is now.
How does this relate to investing? Investing gives you the ability to overcome inflation, by making your money earn at least that much to keep it from depreciating. Investing interest rates have been held at the share market at about 10% for the last two decades, providing a relatively stable way to grow your money!
Start up costs?
So what’s it going to take to get involved in the share market? Probably not as much as you’re thinking, the share market carries only a minimum of $1,000. This assumes that you have no debt, but even then it doesn’t take long to get it paid off.
Do I need professional financial advice?
You can get financial advice if you’d like, but the truth is that you likely don’t need it. In fact, in 2010, several fund managers were outed by Morningstar as having underperformed for their clients. Just think, on top of under-performing for their clients, they still charged fees for managing the fund, adding to their loss.
Which shares should I buy if I don’t get professional advice?
Do the research, and select a company, just one will do for now. By picking a company you’ve picked a starting point, and by doing your research you’ve assured yourself that it’s a stable one. There’s no reason that this kind of investing can’t work for you, in fact according to Peter Lynch’s One Up on Wall Street smaller investors have a significant advantage over bigger investors, as they tend to be more careful about what particular companies they invest their time in.
Let’s look at an example here. Several years ago I had a friend who was thinking about investing in Apple. The company had been struggling for a long time now, but he believed in it and wanted to invest. Thankfully he decided to go with his gut, and went on to ride the tails of one of the most successful companies today!
So where should you look for your first investment? Look at businesses you know, businesses that you’re interested in or work for, or a business you know of in an industry you have a passion for.
Once you start, it gets easier. You’ll become more comfortable as time goes on, and learn more about the market as you move forward. You’ll have both successes and failures, but so long as you’re prepared for that you’ll bounce back.
What happens if there are crashes in the market?
If you’re going to be investing in the stock market you need to know one thing above all others, it will crash. You need to be prepared for this reality, and the best way to do that is to invest with a long term game in mind. If you invest for the long term, you have time to wait through the crash until the market bounces back.
The key in long term investing though? Not investing money you need in the short term! Make sure that what you’re putting aside is what you can afford to put aside, not more, or you may end up hit harder than you thought by these crashes.
So long as you keep these tips in mind you’ll be well on your way to getting started in the share market.