How to actually start investing your money in 4 easy steps

Intro into investing

Last week we discussed starting with investing and why stocks might be an excellent place to start for the starting investor.

Today, we’ll dive into the practical side of how to go about actually starting with investing.

Disclaimer

As always, the information I provide is sourced from both reputable sources and my own experiences. I intend to inform you about the financial world and help you make better decisions, but none of the information in this email should be taken as financial advice or advice to purchase certain financial products. Investing involves risk of loss. See our full disclaimer here.

Don’t start investing before you have these things figured out

You might be excited to start, which is excellent because investing can be fun!

However, taking some prerequisite steps before you start is essential.

• First of all, you should be able to save money every month by spending (way) less than you earn

• Secondly, you should have built a safety net of around 3-6 months of living expenses in your bank account.

• Lastly, and this is the most important one, you should only invest money that you won’t need in the coming 10 to 15 years. This way, you avoid having to sell your investments at a bad moment because you need the cash!

We discussed these topics in detail in the third newsletter. Please have another look if you need a refresher!

What’s a broker, anyway?

A broker is simply a person (or a company) who buys and sells goods or assets for others.

You and I, as individuals, can’t trade on the stock market directly.

That’s why there are brokers: companies that do this for us!

They act as an intermediary between the investor and a securities exchange, where the stocks (or other assets) are being traded.

Before you can start investing, you need to sign up with a broker.

Which broker should I pick?

Good question! This is a bit like picking a bank or a telecom provider.

There are plenty of differences between them in terms of price, how broad their offer is and more.

Over the coming weeks, I will be posting reviews of different brokers on moneyminds.io​

I personally have accounts with SAXO and DEGIRO.

Other big names in Europe are BUX, Interactive Brokers, eToro and many more.

Remember, we’re trying to become long-term, well-diversified investors 😉

Singing up

After signing up for a broker, you must go through some additional information steps. This is much like signing up for a bank account, only more elaborate.

You will be asked for personal information, information regarding your tax situation, you’ll have to sign some legal agreements, you will be asked to connect an existing bank account, and lastly, you’ll have to take a knowledge test.

This knowledge test is there to check if you know enough about investing to start.

You might already know enough, but if not, make sure you keep reading these newsletters and checking out moneyminds.io 😄

Bring in the money

If you have passed all of the above, you’re ready to start investing.

You can start by depositing money from your investment account into your bank account.

This act in itself doesn’t mean you are investing yet, but simply that there is money in your account to start investing with!

It might be a good idea to start small and play around with the platform, and investing in general, before bringing in the big bucks.

What to invest in?

This is a tricky question to answer, as your investment choices depend on your personal convictions and situation.

Only a certified financial advisor can give you actual investment advice.

This is especially true in the crypto space.

That’s why I’m not recommending you anything in particular, it is up to you to make your own decisions.

However, staying away from individual companies at the start would be highly advisable.

Instead of buying individual stocks, it might be wiser to start with a broad selection of many different stocks together (diversification).

For this, you could look into diversified index-tracking ETFs.

It could be a good place to start if they follow a broad index such as the MSCI World (1546 companies worldwide) or the S&P 500 (top 500 companies in the U.S.).

All of this might be a bit overwhelming, but don’t worry! We’ll dive deeper into investment options soon!

Dollar Cost Averaging

Lastly, if you have figured out what to invest in, it might be wise to do ‘Dollar Cost Averaging’.

DCA, in short, means buying the same dollar (or euro) amount of investments every month (or week, etc.).

Let’s say you want to invest €3000. Instead of doing it all at the same time (and risking the chance of having unlucky timing), it might be smart to do it over six months’ worth of investments of €500 each.

Set and forget

Most brokers will over you the option to make a “plan” and invest a fixed amount each month automatically.

This is great if you want to be a consistent investor.

You can set up automatic investing (and bonus points if you do an automatic transfer from your bank account to your investment account too!).

This way, you can automatically invest a bit every month and see your investments steadily grow!

Wrap-up

Before we can start investing, we need to have our prerequisites solved (see newsletter #3).

Then, we need to sign up for a broker, provide information and pass the knowledge test.

After that, we need to transfer money into our investing account and pick what we want to invest in.

Diversified index tracking ETFs might be a good place to start.

Dollar Cost Averaging (DCA) and automatic transfers might help us stay consistent.

We’ll dive deeper into the topics above soon!