Are stock investments worth it for starting families?
Congratulations on this huge step in your life: starting a family.
No doubt there is a lot to prepare for–from preparing for your future children and saving up for family expenses–to finding a suitable house.
A starting family, of course, should always consider their financial stability, not just for today, but also for the future. There are many ways to ensure that, like getting insurance or putting money in stock investments.
As your family grows, what would be the right method to earn money that will be stable in the future?
One way is to invest your money. Investment, according to Investopedia, is “an asset or item with a goal of generating income or appreciation.”
That’s a lot to take in, especially for someone who’s starting a family soon and has zero knowledge about investing. But why should you risk your money in investments?
While saving your hard-earned money for future goals is indeed a practical choice, it won’t really grow that much while it’s locked up in a bank. With investments, there is a bigger possibility to generate more cash for you and your family. So your money is working for you passively.
There are many ways to invest in. For instance, you can invest in real estate, commodities, loans, or bonds. Investing in the stock market is a popular option.
If that’s not convincing enough, consider that your cost of living will only increase year by year. Hence, investments may just be the solution to help you reach your financial goals.
Understanding the world of stock investments
How do you start investing in the stock market?
Many stockholders today began with little to zero knowledge about investing, just like you. Stock investment is not an easy path to take. Before heading onto the world of investment, equip yourself with ample knowledge which you can acquire from tutorials and readings online.
Self-learning may be overwhelming considering the amount of financial jargon you’ll encounter. In searching for a beginner’s guide online, only read from legitimate financial websites like Investopedia or from a stock brokerage or trading websites. These sites can explain the most important factors for beginners like you. But if online tutorials can’t seem to get you off the grey area, you can always consult with the experts in this field.
Set an investment goal
Before you actually invest your money, ask yourself why you’re getting into an investment, in the first place. In other words, what is your investment goal? Why are you putting away money, and what are you going to use it for?
Common reasons include saving up for your future child’s education, a new house or a business. It can be anything you put your mind into, that will help secure your and your family’s financial future.
Getting clear on your investment goal/s can serve as a powerful motivator, to help keep your eyes on the prize, especially when putting away money starts feeling like a chore.
Set a time frame
As they say, the early bird gets the worm. The same can be said about investing early. The younger you start, the bigger your investment nest could get. One way to achieve your investment goals is by setting a feasible time frame called an “investment horizon”.
An investment horizon is the time period where an investor maintains his security or portfolio before selling it for profit.
Create an investment budget
With an investment plan and time frame in place, creating an investment budget is the next step you would want to consider. When you’re starting a family, other financial priorities can easily compete for your hard-earned money. This is why you’ll have to create a separate budget for your investment and treat it as you would a regular expenditure.
Make sure that your investment won’t hurt your daily budget and expenses, and it won’t place your family in a tight financial spot. Don’t make the mistake of investing a huge amount of money, only to realize that you can’t commit to it in the long-term.
Pick an investment wisely
Now that the basics are out of the way, it’s time to choose the company to invest in, and what kind of investment you will make.
It is important to know which would be the best investment for the goal and budget you have set. For the types of investment, you can buy shares of companies directly, invest in mutual funds or the popular Exchange Trade Funds (ETF), which–according to some–is the most affordable way to invest.
Strategize and Analyze
Investing in stocks is quite a game. A lot of people are doing in the same boat as you, so you must strategize in order to make the most out of the money you invested in.
You can invest in one company, or divide your investment money into a handful of small investments. You can also re-invest your earnings when your money starts to earn on its own.
But be reminded that investments don’t work like magic. You can’t just leave your money there and hope for the best. You have to do your part, too.
So, keep track of stock news and market updates, to see if the stocks of the company you invested in are actually growing and your investments are paying off. When updating yourself with financial news, make sure to understand the terminologies being used in the world of investment.
If you’re ready to invest for your family’s future, then it’s time to head on to your chosen investment institution and begin turning your financial goals into a reality.
Investing in the US Stock Market
The US stock market is a huge playground to walk around in, considering the huge number of companies you can invest in. There are many ways to invest in the stock market, depending on your strategy and experience.
A common method of investing in stocks is through a broker. Although this requires a commission percentage, this would be a better option if you’re a beginner in the investment industry.
Upon opening a brokerage account, you will have to identify the type of stocks, as well as how many you will purchase. From there, your broker will be the one to execute this trade.
If you’re concerned about the loss in investment due to commission fees, there are stock brokerage firms that offer low-commission to commission-free trading. COL Financial is a good option. Its commission rate is only 0.5 percent of the gross trade amount if you are assisted by a broker.
In the US, there are four popular stock brokerage firms due to their reputation and client assets. These are Charles Schwab, Fidelity Investments, E*TRADE, and TD Ameritrade.
If you don’t want to go through a broker for your investments, you can directly buy company stocks through the Direct Stock Purchase Plan (DSPP).
Under the DSPP, the company–through a transfer agent or plan administrator–will deduct the agreed-upon amount from the investor’s bank account every month for six months, or whatever frequency and duration you and the company agreed on.
Another method is the Direct Reinvestment Program (DRIP), wherein you can take the cash dividends the company pays you and reinvest it by buying more shares of the company.
These are just a few ways on how to invest in the US Stock Market. Remember that in choosing your method of investing, consider your strategy and budget. Weigh your options, their pros, and cons, while also considering your personal financial situation.
Best of luck to you and your future goals!
About the Author