Alexia and Margot de Broglie are the co-founders of Your Juno, a financial education platform commited to the empowerment of women and non-binary people. In an exclusive series for Adolescent, they explore key topics related to money and finance.
Have you toyed with the idea of investing but felt too overwhelmed to begin? You’re not alone—at the end of 2021, we asked the Your Juno community about their money goals for the coming year, and one in five said their top goal was to start investing in the stock market.
The world of investing has been historically confined to finance bros, so the language surrounding investing has remained unnecessarily confusing. We’re on a mission to close the gender wealth gap by debunking the jargon and sharing the need-to-knows of investing for beginners.
What actually is investing?
Investing is the act of using your savings to buy an asset in the hope its value will increase over time. Because you’ll be holding onto this asset and won’t have easy access to your cash, you should only invest money that you won’t need in the next five to seven years. Investing is for more long-term goals. The bonus is you’ll be looking to make a return of over 5% each year, so patience pays off!
Do I really need to invest?
Just one in five women currently hold an investment, compared to one in three men. This works to our disadvantage, and means we miss out on high potential returns across our lifetimes.
Why does this matter? Because of a sneaky thing called inflation. Inflation is the rising cost of goods and services—it’s the concept that your dollar today won’t go as far as your dollar tomorrow. As it stands, inflation in the U.S. is the highest it’s been in 40 years, currently reaching 7.1%. This means that something that cost you $100 to buy in 2021 would cost you $107.10 in 2022.
It gets worse. You do get some returns for allowing a bank to hold your money—this is called interest—but right now, interest rates are historically low, with the average interest rate at 0.06%. Combine low interest rates with high inflation, and your money is rapidly losing value as it sits in your bank account.
This is where investing comes in—it has the potential to offer you 5-10% annual returns, therefore beating inflation!
Okay, I’m sold—what can I invest in?
Not so quick. Before you get started investing, you need to make sure that you have an emergency fund that can cover three to six months of living expenses, so that you can have cash on hand if you need it quickly. You also want to make sure that you’ve paid any high-interest debt, things like credit cards and payday loans.
What can I invest in?
Generally speaking, almost anything can be turned into an asset if its value will increase in the future. You can invest in anything from wine to start-ups, renewable energy firms to crypto, properties, and design studios. Here we’ll focus on stocks and bonds, as they’re traded on the stock market.
Shares (AKA stocks)
These are little pieces of big businesses, like a slice of a pie. So when you own a slice, you own a piece of the business, and when the value of the business goes up, so does your slice!
Bonds are essentially loans made to large organizations. Unlike shares, you don't own a piece of the organization. You’re simply lending them your money, so you don’t become a part-owner. You can also buy government bonds, too—these are generally considered low-risk investments.
How do I invest in them?
Before you start investing, you need to have a clear plan and come up with an investment strategy. Your investment strategy will be unique to you. It will be based on your current circumstances and determine your asset allocation. In other words, it will determine how much you will keep in cash savings versus how much you invest in shares and bonds (the three main players).
Two golden rules
Now that you’re really wrapping your head around investing, it’s time to follow these two golden rules.
1. Diversification is wise.
Diversification refers to the act of investing in various industries and assets. Diversifying is a way of doing damage control, as you’re spreading out the risk across your investment portfolio. Basically, don’t put all your eggs in one basket.
Just think, if you’d put all your money into British Airways just before the pandemic, you could have lost up to 70% of that money. But if it was spread across many different industries, you would have been a lot less exposed to the slip-ups of a single company.
2. Patience is everything.
If you want to maximize your chances of high returns, you have to be in it for the long run. The longer your money stays invested, the higher the potential returns are. This is the beauty of compound interest’s exponential growth. (Compound interest is the addition of interest to the principal sum of a loan or deposit—in other words, interest on interest.)
Secondly, the overall market trend is upwards—but recessions can happen, so you need time to ride them out. The key is to wait out the course of your investment, according to your strategy, even as the market fluctuates (just like a loyal friend!).
Funds are your new best friend
Managed funds and ETFs (exchange traded funds) are like having a basket filled with small slices of lots of companies. By purchasing a share of an index fund, you’re essentially buying lots of very small pieces of companies.
One of the most famous ETFs is the S&P 500 ETF, which invests in the 500 largest companies traded on the U.S. stock exchange—Google, Apple, Microsoft, Tesla, Disney, etc. Investing in an index, like the S&P 500, is a good way to spread risk because you aren’t just investing in one company.
ETFs are becoming more and more popular with first-time investors, as they’re automatically diversified, simple to buy, and have low fees.
Want more proof? Warren Buffet, who’s renowned as the world’s best investor, has instructed in his will that 90% of his money be invested in the S&P 500.
How much should I be investing?
As a general rule of thumb, you should only invest money you can reasonably expect not to need for at least five to ten years. That’s because the value of your investments can rise and fall, particularly in the short-term. If you invest money that you need in a year’s time, it gives you very little time to ride out market fluctuations and benefit from the potential long-term rise in value.
The common saying goes “don’t invest what you can’t afford to lose.” This is because there is always risk involved when investing.
So how do I start?
The first step is to decide how much you want to invest every month, and determine your goals and how much risk you’re willing to take. Then, you’ll need to pick an investing platform. There are different types of platforms depending on the level of involvement you want to have.
For beginners, robo-advisors have gained in popularity in recent years. You can think of these as an autopilot for your investments. After initially answering a series of questions about your resources and financial goals, the robo-advisor will make ongoing decisions about how to invest your money. According to Forbes, the most used robo-advisors in the U.S. are Vanguard robo-advisors and Charles Schwab. It’s always a good idea to do your own research and find out which one suits your needs best.
It is generally recommended to start by investing small amounts of money to slowly build up your confidence. Think of investing as a muscle you train at the gym—work at whatever’s a comfortable pace for you.
Where to learn more about investing
The key to investing as a beginner is getting comfortable with the process. Learn more about investing by downloading the Your Juno app or by signing up to our Introduction to Investing course, where we deep dive further into stock exchanges, types of investments, and how to invest confidently at any stage of life. Check it out here.
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