I am not writing this in real time. I wrote this a month ago, before I took a hiatus to Israel and Greece and hopefully, I have now “found myself” or something of the sort. Regardless, writing this far in advance is a sure-fire way for me to hate everything I have written. (I am editing in real-time, and I do, in fact, hate everything I have written. I also think the only thing I “found” on vacation was laryngitis and a decent tan – but more on the important things next week).
You’re probably wondering why I am writing about how to start investing when I have had a column about how to start investing for almost two years now (August 17th, 2020, my boss let me publish my first article on why I hate everything and everyone in finance and I have not looked back ever since. It is of note that I have also not changed my opinion on the matter).
Well, by some charity act of God, I continue to have cool girls subscribe to this newsletter (all my readers are cool girls only). So, I figured for all my new GF’s I should make an updated guide on how to start investing. And for all my old GF’s, a little pick-me-up never hurt anybody (especially when made with Bailey’s).
(I also know for a fact that half of my subscribers that have been with me since the beginning have yet to dabble in investing, so this too, is your fresh start).
(This is present-day me editing – I have no reason or excuse for the complete abuse of the bracket in this article. Please just try to disregard).
THE COOL GIRLS ONLY GUIDE TO INVESTING.
Step 1: Elle Woods Goes to Harvard.
Okay everybody. It’s time for your Elle Woods prepping to go to Harvard montage. (I know you know the one). Get out your colorful sticky notes and sparkly pens and waste as much time as possible writing out your financial goals, budget, savings, risk comfortability, credit card debt, etc.
Step 1 is essentially for sorting out this type of shit:
“I know I am not the only one who bought ‘Starz’ on Amazon Prime for the sole purpose of watching a Mary-Kate and Ashley movie and then forgot to cancel my subscription. It took me 6 months to realize what that $8.99 statement was on my credit card. (All told, I spent $53.94 on the film “New York Minute”. Worth it.)”
Step 2: Know the game you’re playing.
When I lived in Toronto, I went to a Blue Jays game (baseball for those of you unfamiliar with the Blue Jays) with my sister. About 20 minutes into the men running around to touch the 4 plushy white pillows, I asked her when the intermission was. There is, obviously, no intermission in baseball.
This is a metaphor. And a bad one at that. But I am trying to tell you that you must know what the stock market is before investing in it.
In the simplest of terms, the stock market is a collection of markets and exchanges where stock buying and selling takes place. (The terms “stock market” and “stock exchange” are used interchangeably. This is just like “pretty girls” and “stomach problems”. They are one in the same).
There’s a whole onslaught of other nap-inducing elements that live within the confines of the “stock market”. A few of these include ETFs (exchange-traded funds), commodities, bonds, currencies, and oh you’re asleep! I’m asleep! Let’s move on.
The last thing you need to know about baseball (kidding!) is that there are popular girl exchanges. By this I mean, the most well-known places to do said investing.
This includes the New York Stock Exchange (NYSE), Nasdaq, and oh my gosh you’re asleep again! So am I! Do this research with your sparkly pens in your own time.
Step 3: The First Date.
Your hair and makeup are done. You’re wearing black. You are giving the essence of “oh this old thing, I just threw this on” despite giving your roommate an unsolicited fashion show for 2 hours prior. It’s now time to choose the oh so lucky date. (You are all cool girls here, so everyone is vying to date you).
In the world of stocks and in the world of markets there is a figure called a “broker”. This is basically just a “professional person” (whatever that means) or digital platform whose job it is to handle a transaction for you. For new investors there are 3 basic categories of brokers. (This is what I mean by choosing your date).
- Full-Service Broker.
This is a real-life human being who manages your investment transactions and provides investment advice for a fee. This option is cool for someone like me who thinks that citizens of the world care about my personal plights. Jay (my full-service broker) is privy to not only my financial life but also my deep-seated traumas and crippling fear of failure. This is the therapist and financial advisor all in one option. - Online/Discount Broker.
The Costco version of the full-service broker. (I’ve never been to Costco, but I think that statement stands up no matter). A discount broker is a stockbroker who carries out buy and sell orders with little or no commission. In turn, a discount broker does not provide the same level of investment advice or perform analysis on a client’s behalf like the full-service broker would. - Robo-Advisor.
We’ve gone full computer mode here. This option is exactly what it sounds like – a robot advisor. (I actually don’t know if that’s true. I made it up.) Regardless, this class of financial advisor provides financial advice and investment management online with moderate to minimal human intervention. They provide digital financial advice based on mathematical rules or algorithms. Ew, who needs feelings anyway?
Step 4: Get in Loser, We’re Going Shopping.
You’ve figured out your financial goals (sexy).
You’ve figured out how to play “baseball” (sexier)!
You’ve chosen your first date (sexiest)!!!
It’s now time to figure out what you should invest in. And as aforementioned, there’s a myriad of nap-inducing options!
PSA: There’s no right answer for everyone. I hate when I read things that say stuff like this, but I would never lie to a cool girl – and your investment journey is personal. Which stocks you buy and how much you buy depends on the amount of money you have available for investing and how much risk you’re willing to take in hopes of earning a higher return. Here are the most common securities to invest in, listed in descending order of risk:
1. Stocks.
A type of investment that signifies partial ownership of the issuing company. This entitles you to all sorts of fun things like a proportion of the corporation’s assets and earnings. (Unfortunately, this also makes you privy to their losses).
2. ETFs
An exchange-traded fund is a collection of stocks. This basically lets you purchase many stocks at once with the ease of only making one purchase. A 10 for 1 type of deal.
3. Mutual Funds
Kind of similar to the above. Don’t really get the difference. My spotty research suggests that ETFs trade at varying prices throughout the day whereas you can only trade mutual funds at the end of the trading day and at whatever price the fund is worth at that moment.
4. Bonds
When an investor buys a bond, they’re effectively lending their money to the bond issuer, with the promise of repayment plus interest. Remember when you had to take out that line of credit to finance your European vacation? In this scenario, you are the bank.
Step 5: Never Listen to Me.
I wrote this at the end of another listicle, but it’s simply too clever to not recycle.
“That would be a good thing for them to cut on my tombstone:
Wherever she went, including here, it was against her better judgment” – Dorothy Parker
Until next week. Stay cool.
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