I always love this question because the answer depends on the person and the type of discipline they have around their investment strategy. I recommend investing some money in individual stocks as a forcing function to keep you in sync with the markets and keep learning how to make more money.
I am going to start off by letting you in on a secret of how to get free stocks. Yes, you read that right. Free stocks. It doesn't get any better than kicking off your stock investing with free money, right? When Robinhood arrived on the scene in 2013 it was a game changer for millennial stock investors. I remember wanting to invest in stocks when I was a teenager, but all of those minimum buying thresholds and broker fees were a massive deterrent. Robinhood not only let you buy and sell for free on your phone, but there was no cost to starting or a minimum amount.
So back to the free stocks - the way Robinhood gives you free stocks is if you invite your friends to join the app. For example, if you sign up via my affiliate link, both of us will get a stock worth up to $300 (you have to sign up via a friend's link to get the free stock, not just download the app :). Then, you can turn around and share your affiliate link with friends!
So how have I been successful in making money with stocks? When I first started investing in stocks, I gave myself a small budget of $100 to play around with and didn't worry if the stock would grow or not. I was basically just trying to get "emotional trading" out of my system. I advise all new investors to do this. You'll quickly see that everyone emotionally trades and it's better to lose $100 than thousands. So after I learned a little on my mistakes, did some research, and talked with friends who had been trading for a while, I came up with a basic strategy I follow. This is *my* basic strategy - remember, I am not a financial advisor or strategist, just a hobbyist sharing what I've found to work for me.
1. I have a budget of how much I want to spend monthly. My stock budget fluctuates based on if I want to invest more into other financial accounts but usually I set it at a certain amount. I think having a budget is really important - it helps you accumulate funds for the day you want to buy up a large amount of stock, but also keeps your emotions in check so you aren't emotionally investing.
2. I invest in blue chip stocks. First and foremost I invest in blue chip stocks which are stocks of companies that are well known and well established. For example, Apple would be considered blue chip. These are companies that over time will continue to grow and in the long term you'll see returns on your investment. I am a big believer in a long term strategy when it comes to the stock market.
3. I invest in stocks that pay out dividends. A dividend is a share of a company's profits distributed to shareholders, and usually paid quarterly, like a bonus to investors. Even though dividends aren't guaranteed, a company will distribute dividends because dividends are typically a sign of financial health. A company may offer them to attract investors and drive the share price up. The reason people invest in dividend stocks is many investors rely on them as a source of income. Because companies pay their dividends at different times, people can create a schedule to receive a dividend check each month of the year. What I usually do is just reinvest the dividend immediately into more stock. I mean, what an awesome concept that you get a "bonus" for investing in a stock!
4. I look for "Chipotles". "Find your chipotle" is a phrase I tell my friends and I follow it with the story of one of my friend who about 10 years ago invested in Chipotle. She was passionate about sustainability, loved startups, and believed in Chipotle's "food with integrity" mission. At the time, Chipotle was a nobody compared to the McDonalds of the world. My friend was obsessed with reading everything about Chipotle and decided to buy thousands of stock in the company. At the time, the stocks was worth a little over $50. Guess where the stock is today? In the $600s. She was able to sell her stock and buy an apartment in the priciest neighborhood of Seattle. I've never forgotten that story, partially because I lived it with her selling the stock and buying a stunning apartment. So, when I finally got around to investing, I looked for my "Chipotle". I've always been a BIG advocate for small businesses, I love crafts and admire artisans, and have even sold on Etsy before. So when I first started investing, I bought a handful of Etsy stock at $7. I continued to buy it, and just trusting my gut and what I new about the industry and the company. Last week the Etsy stock jumped to over $70. Whenever, I would tell people I was buying Etsy stock they would look at me like I was crazy. So my point is, you don't have to know a ton about the tech industry to invest in stocks. That's what the dividend and blue chip strategy is for. Focus on the industry you are in or an industry you love, what you personally love or your hobbies, your knowledge and expertise and bring that to your investing game. It's A LOT more fun! And every single time I invest in a whim stock (someone telling me about a stock that they just know is going to grow) it usually doesn't pan out.
Do you invest in stocks? What are some strategies that have worked for you?
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