The recommended time to start investing for someone with no investment experience depends on many factors. There are a few steps I would recommend doing:
- Set a goal. The goal can be created by answering questions like: Why do you want to invest? What is your time horizon? What do you want to achieve from your investments? Will you be active or passive (meaning how much time are you willing to spend monitoring your account, adjusting investments, etc.)? For example, my goal was to create a portfolio that would replace my income as soon as possible. I planned to be very active and spend an hour or two every day monitoring and analyzing my portfolio, stock market, and research stocks. This can take you a day or a week to think about your goals and objectives.
- Once you know your goals and objectives, start searching for investment vehicles that meet those goals. Will it be growth stocks, dividend stocks, trading options, or futures? No matter what you find, paper trade it to learn the mechanics of investing/trading. Read about the vehicle you plan to use. Hang on with other investors/traders on social media and ask questions. This is the longest part, which may take months or years. That depends on what you choose to do. If, for example, you want to start building wealth right away, have a long-term horizon, and want to invest with minimal effort now and learn later, you can invest tomorrow. As Warren Buffet said, buy an index, for example, SPY, and invest regularly every month. That will take you one day to start (well, it may be more days because of waiting for your brokerage account to get open). While you are investing in SPY (in our example above), you can spend time learning about other investment vehicles like options, dividend stocks, futures, etc. You will be building your account in the meantime.
- To start investing, you can start with as little as $1 these days. You need to find a broker that will allow you to buy fractional shares of a stock or index and be commission and fees-free (most of them are free today). So, buying stocks or indexes will be easy and with minimal capital. However, if you want to venture into options or futures, you will need at least $2,000 – $5,000 minimum capital (depending on a broker). This also depends on the type of account you open with a broker (cash or margin).
- If I were an inexperienced investor starting my investment path, I would do the following:
- Open a brokerage account.
- Set an automatic deposit of, for example, $100 every month.
- Set an automatic investment of $100 a month to SPY (if the broker allows automatic investing; if not, do it manually every month).
- Let the investing go on autopilot until it grows to larger amounts. If you can afford to invest more, increase your monthly contributions as much as possible.
- Learn about stocks while still auto-investing. Learn about other strategies. Learn about dividend stocks and growth stocks. Learn about options. Paper trade strategies you find, paper trade options, paper trade futures, and learn from it.
- Train your mind to ignore the market’s everyday fluctuations. Subscribe to services that can help you stay informed about the market (for example, my newsletter, LOL). Learn to distinguish between pullbacks, corrections, and bear markets. I am not necessarily a buy-and-hold investor, and I developed a strategy (signals posted in my newsletter) to get out of the market when we see a bear market while ignoring pullbacks or small corrections and going back from cash when we see the end of the bear market. But if you decide to stay invested (buy and hold) all the time, be prepared to stomach large draw-downs (20% – 70% declines during violent bear markets like in 2000–2003, 2007–2009, and 2020; many investors lose money panicking and selling suddenly forgetting that they were “buy and hold” investors).
- Once you learn other strategies, understand them well (know how they make you money as well as how they can lose you money, and if they are losing you money, how you can react, adjust, or repair the trade), paper trade them, you can start using them slowly in your account too.
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