How To Get Involved In The Stock Market?

When I went to Australia in 2011, I noticed one thing the bank interest rate was really low. And after Australia when I came to the USA I noticed my checking and savings account offered exactly 0% APR. I did not understand about inflation back in 2012. But I wanted to make more than 0% on my savings. I did not know any way I could safely earn any yield without losing money. On the hind side, it was a perfect time to buy stocks. It was right after the financial crisis and the central banks were printing money hand over feast to inflate asset prices. Stocks being financial assets were up for grabs. But unfortunately, I did not get seriously involved in the stock market. In fact, I pulled the trigger in 2015 after the oil price crash.  But, I really got interested after reading Tony Robbins Unshakable. Funny thing is everyone was talking about another 2009 like stock market crash and I have been following those talks since 2014. Those fear-mongering caused me a great deal. I did not start investing in 2014 because I was waiting for the market to crash. To be honest I thought I got a framework to follow from the book Unshakable. But Tony, Robbins said, every year the market drops by at least 10%. I was reading the book around 2016 fall and I waited for the entire 2017 for that correction and it never came. So, I figured it was not the right way to go, but at least I got the confidence from that book.

So, How To Get Involved In The Stock Market? The way I started was using one of robo advisors. I signed up for Betterment and based on my selection they selected a few ETFs to invest my money in. But, then I realized that I could invest in the same ETFs through Robinhood and I could save the fee Betterment charges. And if you have read unshakable you know all that book tells you about is to save on fees. And that is how I got involved in the stock market. 

I have another admission to make about another mistake I made. That is not opting on for 401K. I am sure you know about 401K. That is a great way to save on tax and put your dollars in the market. And your employer often matches your contribution up to a certain percentage or amount. Make sure you do not waste a ton of money on fees. Select a low-cost fund and invest for the long term.

 

Which ETF should you buy?

According to Warren Buffet ameture investors should own SPY which is SnP 500 index fund. Because this index fund holds equity of 500 largest businesses or the USA. And almost 50% income of these businesses comes from international markets. So, Buffet things America will always do good in long term and so will these 500 companies. But what if Buffet is wrong? Japan was the next US in the 90s and the Nikkei touched 38000 and after almost 30 years Nikkei is still in 20000 territories. So, I think the total market is a safer bet. There are few ow cost ETFs out there that track all big markets. So, if you are optimistic about the future of this planet then you can invest in that fund. If you are bullish about any particular sector, such as energy, pharma, utilities, tech etc.

I am not a financial advisor, so what you or should not own. I personally do not own any ETF. Well, I own treasury ETF in my 401K. That is one way I am keeping some dry powder for when the market finally comes down I can buy equity.

Why equity and why not bond or gold or just cash?

Because inflation takes away the purchasing power and our dollars lose purchasing power. Gold and other commodities are great to keep up with inflation. Cash is not efficient to keep up with inflation. You need to beat inflation and make some more to build wealth in the long-term. Equity is the best. Because these are part ownership of businesses. The idea is the businesses will keep raising price of their product and services and they will make more money with time. So, the value of your investment will go up. That is why not gold or cash but Equity. In fact, gold is one way to store your purchasing power. But, equity can beat inflation and increase your purchasing power.