Most people think that they can’t start investing until they’re already financially content. Aridni plans to prove them wrong. If you have $100 sitting in the bank, you’re ready to start investing. If you cut back on your daily latte for a month, you’ll have the financing to start investing.
**hint to high schoolers: I bought my first stock in high school. Instead of letting my college money work for other people in the bank, I made my money work for me. As a result of my investment decisions, my college money in stocks doubled while the money gained in the bank was enough to buy a Big Mac.
So how do you start?
1. START RESEARCHING. You want to look at the types of investment you want to make (bonds, stocks, real estate, a new business…) and the specific industry types that you want to focus on. The biggest rewards usually come from the biggest risks. I couldn’t sacrifice all of my college money, though I had enough to experiment with. In addition, decide if you’re looking for a short-term or long-term investment. Typically, the shorter, the riskier.
2. MARKET TIMING. You can seldom predict the outcomes of investments, which is why most people depend on 9 to 5, stable jobs instead of the possibilities of investments. The Modern Portfolio Theory by Nobel prize-winning economist, William F. Sharpe, argues that 75% of the changes in market trends come from unexpected events -meaning you cannot fully calculate a right time or wrong time to invest. Most businessmen say, “Go with the gut.”
3. BUY LOW, SELL HIGH. It’s more than stocks. Buy everything at low, undervalued prices and sell everything you can for more than your purchase price.
4. DIVERSIFY. The other day, I spoke with a woman who planned to invest all of her money’$200,000’in bonds. Never, never rely on one form of investment. More specifically, never put all of your money into one industry. If you’re buying bonds, consider a mix of small business (high risk), big business (medium risk), and government bonds (low risk), but don’t stop there. Invest in other areas, too. Jim Cramer would throw that chair of his on TV at you if he knew that you were investing all of your money into one industry. Remember the dot com bubble? What if all your money were there? You’d have no money now.
5. KEEP RESEARCHING. Even after you’ve invested, keep researching that market. Jim Cramer challenges his TV viewers to research once a week. Read Business Week, journals, The Wall Street Journal, the local paper, websites…. And a bit of Aridni. The students who get the best grades at school tend to be those who study and know the material best. They don’t stop investing themselves the minute they enroll in the class, do they?