How I Found The Financial Confidence To Start Investing

financial confidence

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When I first joined the work force, I wanted to keep up with the successful women around me in every way that I could. So, I started to take control of my finances and worked to ensure that I constantly learned about the best options for my future. Slowly, with kid gloves, I ventured into investing. I came across an article that said if you invested $5 a day in an account that offers at least a 10 percent return, starting in your early twenties, you would be a millionaire in your thirties. With no barometer for return rates, I imagined the plethora of strings attached to the equation. Nevertheless, the theory burned in my head, and I knew that the time had come to put my money in an interest-bearing account.

Here’s a fun fact: Women are better investors than men. According to a study by Fidelity, we earn higher returns and work better with long-term investments, having more patience when the market dips. However, women are less likely to actually invest their money. After I finally worked up the courage to go through with my investments, my confidence with money hit the roof. Even if my portfolio underwhelms the people on Wall Street, I know that I have money set aside if I need it, and it’s growing every day.

Here's how I gained the financial confidence to start investing, plus a few things I’ve learned as a first-time, female investor.

The initial discomfort is the biggest barrier

Passive streams of income are imperative. Warren Buffet famously said, “If you do not learn how to make money in your sleep, you will work until you die.” Investing is an obvious way to make money while off the clock. Still, the idea is intimidating. I started by reading articles on lifestyle sites, like this one, rather than investment outlets to negate the intimidation factor. Finally, I realized that if other people could do it, so could I.

There is a learning curve with investing that often discourages women from putting their money on the line. If you move through the initial discomfort, negating it as much as possible with research, you will find that investing instills you with a sense of power you have not experienced before. After doing my research and setting up a mutual fund account, I felt a massive shift in confidence and sense of security – and as soon as I saw my account balance, I was hooked. There are no barriers to entry besides the ones we put on ourselves. The opportunity is ours for the taking.

Investing is not out of reach

You’re not alone if you have questions like, “How do I even go about investing? Where do I put my money? What if I lose everything?” The first obstacle is the medium – traditional brick-and-mortar brokers or online trading, which is growing in popularity, especially with younger generations. I imagined barriers to investing online and was pleasantly surprised when I found that you can create an account relatively easily. There are plenty of resources available to help you get started.

If you want to buy individual stocks, you can use online platforms like Robinhood, ETrade or Fidelity. There are many others as well, varying in payment methods. Robinhood is free to trade, but it makes money off the interest your uninvested balance incurs. Etrade and Fidelity have upfront brokerage fees per stock, usually around $7. Accounts like these sometimes require a minimum balance as well. When you just start out, I recommend platforms like Robinhood that have no minimum investment.

financial confidence

Photo: iStock

Mutual funds are a great option for beginners

Another good option for first time investors is mutual funds. Mutual funds are professionally managed, and when you purchase shares, you buy from a multitude of companies. Amanda Holden, founder of Invested Development and The Dumpster Dog Blog, explains, “Mutual funds are like those gift baskets you can win in a raffle. The mutual fund is just the basket that holds everything together — the ‘prize’ is what’s actually packed inside.”

I invested in a mutual fund called Aspiration Redwood (REDWX). Generally, the high-risk securities balance out with the less expensive, low-risk stocks in the fund. “Not only do mutual funds provide instant diversification, which means your money is spread out over lots of different investments, but most small investors would not be able to afford to buy each of those individual investments without a fund,” Holden says.

I researched the return rate of REDWX, with the advice of 10 percent in my mind, and was shocked to find that theirs returned 22 percent in 2017. Mutual funds also have management fees; the unique aspect of REDWX is that you set your own fee. The investor pays what is fair and can research the amount they feel comfortable with.

Aspiration Redwood holds various stocks in sustainable energy and invests in ethical companies. This is a good way to give back, considering studies show that millennials care more than any generation before about socially responsible businesses and use their purchasing power in their favor.

Research. Research. Research.

I asked anyone I could think of with investment knowledge to look at the account I planned on investing in. Do your research, learn from the professionals, and talk to an advisor if you can. “For single stocks, start by learning about the company’s executive team, the consumer demand for its product or services, and the company’s quarterly and annual performance,” suggests Ally Federbush with STASH Investments.

The mutual fund I chose had a page dedicated to its returns and relevant information for potential buyers. Websites such as MarketWatch, The Motley Fool, and US News & World Report offer status updates for different stocks. I searched for each analysis of the REDWX ticker, and it made my decision much easier. For annual earnings reports, Federbush says, “Companies are required to file their quarterly and annual reports with the SEC. These are public documents, which you can access on the SEC website, and they are usually gold mines of information. You can also find company information in the investor section of most public companies’ websites.”

Be prepared for ups and downs

A few months into investing, my mutual fund was losing money. Worried, I researched what was going on and debated selling. Remembering that I am in this for the long haul, I envisioned my money in a safe account, growing alongside the stock market. I also thought of the saying, “buy low, sell high.” Purchasing shares at lower prices and holding onto them generates money long-term.

Keep in mind that volatility is natural and part of the process. “Investors need to understand that their investments will move as the stock market does,” Holden adds. “Your investments will be up during good stock market times and down during the bad stock market times. This is healthy, and what you want to happen! To be a good stock investor, you have to understand and embrace the volatile nature of investing.” Even if your portfolio dips, you are still in the game and saving for your future.