About a month ago, our daughter called and asked if it was okay for her and some of her female friends to visit for the weekend. Some of her friends were aware of my blog on investing, and they wanted to get some pointers. One of the women quipped, “Let’s drink wine and get rich”. When my daughter told me about this comment, I chuckled and thought it was very witty. If only investing were that easy. In many ways it is, if a person is motivated and disciplined.
My daughter’s friends were delightful, personable, and engaging. The topic of investing came up, and I thought about some of their comments before writing this week’s monthly investment blog post. My wife and I live in northern Michigan, where there are so many beaches and lakes. When I reflected on their comments, I realized that investing is analogous to swimming.
Before You Can Start Swimming, You Need to Find Water
Opening a brokerage account is akin to finding water. A potential investor cannot even contemplate starting the investment process unless they open an account with a reputable brokerage firm. I use Charles Schwab, but other firms such as Fidelity, E*TRADE, TradeStation, or Interactive Brokers are equally reputable. Opening an account is free, and these firms offer a wealth of educational resources to help potential investors understand the many facets of investing. As an added bonus, these firms can act as banks and issue credit and debit cards, as well as personal checks. In other words, they can do everything a bank can do.
Dip Your Toes into The Water
For the uninitiated investor, the prospect of starting to invest can be daunting. Nonetheless, there are several ways to test the waters. Investing in a money market fund or a CD (certificate of deposit) is safe and takes very little effort…just a few clicks on a computer or iPhone. One of my daughter’s friends only has a checking account at a “traditional” bank, and she asked if that is okay. My response was, “There is nothing I can help you with if you don’t have your money, at a minimum, in a brokerage firm.”
Her traditional bank is profiting from her failure to invest. The average rate on a checking account is between 0.01% and 0.05%, while the current rate for a Schwab money market fund (SWVXX) is 3.47%. A 1-month CD is 3.97%, and a 12-month CD is 4.05%. CDs are issued at 1-, 3-, 6-, 9-, and 12-month intervals. If you keep your money in a bank, you are effectively giving the bank 3% to 4% of your money. In the financial world, this is called arbitrage, i.e., securing money at a lower rate and then lending it at a higher rate.
Dive In
If the water feels warm and you start wading towards deeper water to swim, there are so many investment opportunities because the swimming areas are unlimited. If you go back and read my investing posts over the last 27 months, I have turned $2,000 into $8,555 or 4X+. My monthly statements are my indisputable evidence. I am not an investment advisor, nor am I a financial guru; I’m just an ordinary person who invests regularly. I want to share the knowledge I’ve gained with those who want to take the plunge.
Try Out for the Olympic Swim Team
One of the women said she had a Fidelity account and that Fidelity had helped her set up an aggressive investment strategy. She asked whether she was doing everything right and whether she should do anything else. My response was, “Since you are young, you are on track for financial independence. Just keep investing regularly.
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Attached is my latest investment statement from Charles Schwab, which shows my gains. For the month alone, I earned over $534. Over this short timeframe, my income stream has grown substantially.
(Next week: My dysfunctional family)
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