Beginner Investor Course: Day 1

Welcome to Day 1 of Learning to Invest with The Budgetnista & Ellevest!


 

Are you excited to learn the basics of investing? I know I am. Woot Woot!

What is the Beginner Investor Course? Haven’t signed up yet? Visit this page for more information: http://wp.me/p3zve4-1hp


Today’s Focus: Intro to Investing

 Today, you’ll learn…

 – How expensive it is NOT to invest

– What you need to do BEFORE you invest

-The first few steps you can take on your investing journey

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Each day you’ll get a video and written lesson walking you through the process step-by-step.

Start with your Day 1 video below, then move on to the lesson.

Let’s meet-up later in our Dream Catcher FB Group to discuss what we learned! See you soon…

 


 


 

“Investing is one of the most important things you can do for yourself. It can build your wealth…not by a little, but by enough to make a real difference in your life.” – Sallie Krawcheck, co-founder & CEO of Ellevest

 

Let’s get this party started…

You DON’T need to:

  • Have a lot of money to start investing
  • Be a financial expert
  • Be able to pick stocks or “beat the market”

You DO need to:

  • Pay off high-interest debt, like credit cards, before investing
  • Make a plan for your financial goals that includes an emergency fund
  • Make investing a habit

 

Here’s a quick RECAP of what we’ll cover today:

Step One: Pay off high-interest debt, like credit cards.

Step Two: The 50/30/20 rule: It’s okay if your budget isn’t there yet — you can still invest!

Step Three: Get a free investment plan based on your life goals.

Step Four: Start an emergency fund.

Step Five: Contribute to your workplace 401(k).

Step Six: Open an IRA to fund your retirement.

Step Seven: Consider how investing can help you reach other, shorter-term goals.

The #1 thing that made women feel confident was the act of investing, saving and putting money toward their goals (63%).” – Ellevest 2018 Money Census

Woman With a Plan

 


Hey hey hey DC’s! Now that you’ve watched the video and know the steps you’re going to take, let’s get to work. I’m excited to share what I’ve learned and to help you get ready to be a confident investor. First things first…

Getting started with investing isn’t as complicated as you may have heard, and you don’t have to have a lot of money to start investing. While there are lots of different ways to invest, for this series, we’re going to focus on making investing a habit, following a goals-based, diversified investment plan.

 

That’s a mouthful, right? Here’s what I mean:

Goals-based: This approach helps you plan because you’re focusing on specific goals. How much money do you need, and when do you need it for your retirement? Building your family? Buying a home? Going back to school or starting a business? If you know what you want from life, you can make a plan for it. And if you have a plan, you are more likely to reach your goals.

 

Diversified portfolio: Let’s break this down — An online portfolio is like a virtual binder that holds a combination of different investments designed to help you achieve your investing goals. This should give you an at-a-glance look at all of your investments at once, which can be really helpful when you want to get a snapshot of your entire financial picture.

 A diversified portfolio will include different types of securities (like stocks, bonds, and alternatives).

 

Stocks are also known as equity, and they are a little piece of ownership of a company. Owning stock gives you the right to participate in company earnings (and losses) through dividends and/or changes in the market price.

 

Bonds (aka fixed income) are loans to institutions like governments or corporations. Most pay a fixed amount of interest for the duration of the loan and are considered less risky than stocks, but with less potential for return.

 

Alternatives — If it’s not a stock or a bond, and it can still be part of your portfolio, it’s likely an alternative. This covers a whole bunch of investments, including venture capital, private equity, hedge funds, commodities like gold and wheat, domestic and foreign real estate and natural resources like coal and gas – even art collections! I know you might be thinking, huh? Don’t worry, it will make more sense as the course continues.

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So, back to the diversified part! For investment portfolios, this means including different types of securities (what I mentioned above, like stocks, bonds, and alternatives). You may be wondering: why not just choose one? Diversifying should include securities from different asset classes (definition below) that act differently, so when one isn’t performing well, another security in your portfolio may be performing better. This helps minimize your risk by giving you multiple ways to participate and benefit from your investments.

Basically, don’t put all your eggs in one basket. Because if you drop that basket, you’ll break all of your eggs. If you have multiple baskets and drop one, then you’ll still have eggs left over. Got it? Good!

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Asset classes just mean groups of securities (like stocks, bonds, and alternatives), that have similar risk and return (earning) characteristics. It’s just another way to describe families of equity (stocks), fixed income (bonds), and alternatives.

NOTE: You need to know the definitions above. They are necessary parts of your investment vocabulary. I had reread them a few times and I even wrote them down to make sure I understood them. Feel free to do the same.

Important reminder: Yes, investing does have risk associated with it. No one can predict exactly when investments will go up or down, and very few can do better than the market consistently. On average, however, the market has returned 9.5% annually since 1928. 

Yeeeeees! Compare that to a typical savings account, with less than 1% interest. If you hold all your savings in a regular savings account, your money isn’t going to grow and,  at worst, it may end up costing you money, because your money isn’t keeping pace with inflation. Yikes!

 


 

Quick Note: What is inflation? It’s an increase in prices and the decrease of the purchasing power of your money. Example: The same pair of sneakers you bought 10 years ago for $75, may cost $100 if you try to buy them new today. Things cost more, but your money can do less.

Remember, you don’t have to be able to pick stocks or “beat the market” (aka trade stocks regularly)— in fact, active money managers who operate like this may make money in the short term, but data shows that just 0.1% of money managers outperform the markets over a 5-year period.

 


Okay, now it’s time to dig into today’s action steps!

 

First things first: If you have high-interest debt, pay it off. As Sallie Krawcheck, co-founder and CEO of Ellevest, says, “If you have credit card debt, pay it off now. Do not pass go. Do not collect $200.” Got it?

Not sure how to start paying off debt. I wrote a step-by-step blog post showing you how here, Pay Off Debt in 7 Steps and Still Maintain Your Lifestyle.

Now, let’s talk about developing an investing habit. As I always say, automation is the new discipline, so try starting with a little bit from each paycheck.

 

How much should you invest?

Well, that’s up to you. A great budgeting rule of thumb is the 50/30/20 rule. In an ideal world, your take-home pay would be spent as follows:

503020

  • 50% on needs: housing, utilities, groceries, transportation, health insurance, debt payments. These expenses are the things you just can’t do without.
  • 30% to fun: vacations, entertainment, dining out, clothing. These are the things that make life enjoyable but aren’t absolutely required.
  • 20% to Future You: savings and investing. This should include any 401(k) contributions to your workplace plan, your emergency fund, and investing.

 


 

 

Your budget may not fit this model, but it’s a great rule of thumb. The most important thing to do is to designate a percentage of your take-home pay for savings and investing and make it automatic, every check, every month — whether it’s $10, $100, $1,000 or more.

Make a commitment now, and then, when you’re able to, increase your percentage.

You may be expecting a raise, or expecting a tax return, and you’re holding off on investing until that day comes. It can be tempting to delay getting started, but here’s the thing:

Every day that you delay is a day where you may be leaving money on the table. In fact, Ellevest has calculated that you could be losing $100 a day, every day you wait to invest.*

Yes! This is one of the reasons why I regret waiting. 

This is also one of the reasons Ellevest has no minimum deposit to open an account — so you can start where you are and then, when you get that raise (seriously, girl, get that raise!) or receive that tax return, and want to contribute more, you can.

 


Homework time!

Oh, you didn’t think a former school teacher of 10+ years was going to give you homework?

 

Okay, so let’s talk about your plan and what you can and should get started with ASAP! If you’re just getting started with saving and investing, you may want to focus on two areas: your emergency fund and your retirement.

Here’s your homework for today. Don’t worry. It’s not hard.

1.Your emergency fund should be 3-6 months of your take-home pay, set aside in a regular savings account (Ellevest has a no-fee emergency fund goal.)
Your task:  If you don’t have an emergency fund, open one. Don’t worry about adding the full 3-6 months of take-home pay today. Getting one started and automating a regular transfer, no matter how small, is the goal. Take action on this today.

2. If your employer matches employee contributions to a 401(k) plan (and if it works with your budget), consider contributing the minimum required to receive the full match. That’s free money!

Your task: Ask to speak with HR. Ask if they match, then dance up and down if they do. Also, ask yourself how much you can comfortably contribute right now from each paycheck to start earning your match. Don’t worry about the amount. Just get started…ta-day!  

3. Open an IRA. Unlike a workplace-based 401(k), this account is controlled by you. So no matter where you work or what your plans for the future include, you’re able to contribute to this account.

Your task: Just wait. We’ll actually do this later on in the week, together. Sallie and I will show you how…step-by-step. I just wanted you to see what was coming up.

If you want to jump ahead and create your free, personal investment plan, you can do it here.


 

In our next lesson, we’re going to create an investing plan together and talk more about how you can invest to support other goals besides retirement. 

See you tomorrow! Same time, same place (in your inbox). 🙂


 

PS – If you have questions about Ellevest’s investment portfolios or site features, you can always reach out to Ellevest’s concierge team – they’re happy to help: concierge@ellevest.com.

 

Before you go, make sure to check-in with me and your fellow Dream Catcher’s in our private FB group, here: Dream Catchers : LIVE RICHER w/The Budgetnista .

Make sure to use the hashtag #DCbeginnerInvestor when you post, so me and your fellow Dream Catcher Investors can find it.


 

Before you go, leave a comment below. 

What did you take away from today’s lesson? What are your investing goals? We all wanna know!

 

Then, share what you’ve done on Day 1 with your tweeps…

Today I prepared to be an INVESTOR with The Budgetnista and @Ellevest #DCbeginnerinvestor Click To Tweet

 

Live Richer,

Tiffany

 


Disclosures

© 2018 Ellevest, Inc., an SEC-registered investment adviser. All rights reserved. For information about Ellevest, and its financial advisory services, please visit the firm’s website (www.ellevest.com) or the SEC’s Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Tiffany Aliche, known as “The Budgetnista” is a paid solicitor of Ellevest. More information about the relationship between Ellevest and The Budgetnista can be found here: https://www.ellevest.com/thebudgetnista.

*Source Ellevest. To arrive at “about $100 a day”, we compared the wealth outcomes for a woman who begins investing at age 30 with one who began investing at age 40 after having saved in a bank for 10 years. Both women begin with an $85,000 salary at age 30 and all salaries were projected using a women-specific salary curve from Morningstar Investment Management LLC, a registered investment adviser and a subsidiary of Morningstar, Inc., which includes the impact of inflation. We assume savings of 20% of salary each year. The bank savings account assumes an average annual yield of 1% and a 17% tax rate on the interest earned, with no account fees. The investment account assumes an investment with Ellevest using a low-cost diversified portfolio of ETFs beginning at 91% equity and gradually becoming more conservative during the last 20 years, settling at 56% equity by the end of the 40-year horizon. These results are determined using a Monte Carlo simulation—a forward-looking, computer-based calculation in which we run portfolios and savings rates through hundreds of different economic scenarios to determine a range of possible outcomes. The results reflect a 70% likelihood of achieving the amounts shown or better, and include the impact of Ellevest fees, inflation, and taxes on interest, dividends, and realized capital gains. We divided the calculated cost of waiting 10 years to invest, $337,657, by 3,650 (the number of days in 10 years). The resulting cost per day is about $92.50.

The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.

The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person.

Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or a mix of funds will meet your investment objectives or provide you with a given level of income.

Forecasts or projections of investment outcomes in investment plans are estimates only, based upon numerous assumptions about future capital markets returns and economic factors. As estimates, they are imprecise and hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

The practice of investing a fixed dollar amount on a regular basis does not ensure a profit and does not protect against loss in declining markets. It involves continuous investing regardless of fluctuating price levels. Investors should consider their ability to continue investing through periods of fluctuating market conditions.

Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.

 
  • Emily Henderson

    Today I learned about the 50/30/20 rule and that I do not need a lot of money to invest. I always thought I needed at least $500 to get started. This has helped a lot.

  • Sandi

    I learned that it’s important for me to pay off my credit card debt before I begin investing.

  • Deborah

    Today i learned, stop and pay off my high interest rate credit card before investing or at least make a plan of action to pay it off so i can have money to invest. I am focus on GOOD “getting out of debt”

  • Dee

    Really good information today, looking forward to tomorrow!

  • Brandi Jones

    I learned that I can take small amounts here and there to invest. I am young , married with three children. It is important to me to invest in things in the hopes that it will allow my family to prosper.

  • Ceezy Jones

    I learned key terms that made complete sense. I also learned (or reaffirmed) that I’m on the right track with no cc debt & emergency fund established. Now I need to set goals.

  • Abeje Leslie

    The 50/30/20 rule was a new concept for me. Great tip! I learned a lot of new vocabulary. Excited for tomorrow!

  • Bridgette Jordan

    Today i learn that in order to invest comfortably pay off high interest credit cards so that you will have more to invest in your fut. Having a emergency fund of 3-6 months of your take home pay is a must. Thanks for the lesson today, I will start building a plan to pay off my credit card debt so im able to free up more money to invest in my future.

  • Charlotte OBear

    Today I learned about the 50/30/20 rule. I am excited about trying it! I also learned some investing terms! My credit card debt is paid down. I’ve already started an emergnecy fund. My investing goals would be to start a retirement fund for myself. My husband has one on his job but my job doesn’t offer it. I also plan to open an IRA. I am excited about learning more about investing!

  • Donna

    Today I was reminded of how much to keep in an emergency fund as well as the 50/30/20 rule. The investment vocabulary review is a great tool also. Thanks!

  • LaChelle Burley

    Today I learned where and how to begin. Thank you.

  • Pamela

    Great information. You are not to young and as you age you really are not too old.Just do something.Time marches on , a little can become alot

  • Leandra Payne

    Waiting to invest is like losing $100 a day, and no one wants that.

  • Shamara Carey

    I learned l much pay off my HIGH credit card debt before l start investing because l am losing possible $100 a day. Also, it’s sooo important to start a emergency savings account for 3-6 months. Since l work for a school l don’t have a 401 k but, l will look into my 403b and 457 savings account to follow up on investing rules. Hopefully, l can one day also open a IRA Roth.

  • Kite Metitiri

    I’m just encouraged by this class…. I’m on the road to clearing high interest debit cards and setting up an emergency fund. I’ve learned the 50/30/20 rule today. Can’t wait to be debt free!!!

  • Kristen Coleman

    I learned about the 50/30/20 rule and the terms used when it comes to investing.

  • Melissa Alexis

    I learned that I am losing $100 a day by waiting to start investing! I also learned about the 50/30/20 rule and will start implementing it with my budget!

  • Doris

    I learnt I have to adapt the 50/30/20 rule asap and create an emergency fund of about 3-6 months of this take home pay. Feeling motivated and can’t wait any longer because I don’t want to loose out anymore by waiting to invest.

  • Regina Harris Mitchell

    My main take away was the 50/30/20 plan. Emergency fund already started and contributing to the 401K the max that the company will match.

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  • Tymikka

    I really want to start establishing my 3-6 month emergency fund. Seems like a daunting task, but I know it’s something that could come in handy if needed. God knows, I’ve been in tough pinches before and would have been grateful to have one.

  • Chardae

    I most definitely want to start utilizing the 50/30/20 rule. I’ve always been skeptical about investing but after watching the video I think it is something I want to get in to

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  • Denisha Yerger

    I definitely like the 50/30/20 rule.