It’s like lions and tigers and bears oh my, except Bitcoin and meme stocks and Robinhood, oh shoot.  Should I be investing in these things?  Is it too late to or is this just the beginning? What should I be focused on or avoid all together?   

Investing today is a lot. In fact, it’s crazier than I can remember in my 20 years as an investor and financial advisor.  

If you’re an investor (or soon to be investor) wanting to make money without losing money, I’ll help you understand how to think about and design your portfolio, then put a plan in place to become a successful investor.  

A portfolio is a collection of investments.  Proper portfolio construction has a lot of important building blocks. Below are resources to understand some key concepts.

  • Time Horizon When is the thing you’re going to be saving and investing for going to be happening or needed?  A wedding is six months away.  A child’s education is 10 years away.  Retirement is 30 years away.
  • Asset classes The different types of investments such as stocks, bonds, cryptoassets, and real estate to name a few.
  • Asset allocation The mix of different investments in your portfolio, often based on how risky you are as an investor and how much time you have to invest. 
  • Risk The willingness of an investor to tolerate the ups and downs of the market.  The riskier the investment, the higher the potential for larger gains and or losses.  
  • Diversification The measure taken by investors to avoid putting all their eggs in one basket.  Mutual funds and ETFs are common vehicles for helping investors balance risk. 

Researching potential stocks to invest in is an important step that many of us skip.  Here are three key areas to research and understand. 

  • Technical factors The idea that past price history can be an indicator of future price. 

Putting a plan together

Don’t overthink this.  You want to save and invest for this year, five years from now, and beyond.  Write down what you want to achieve in the short, mid and long-term:

My short term goals (the next three years) are: 

My mid term goals (three to 10 years) are: 

My long term goals (10 years and beyond) are: 

Now, figure out the amount you need to achieve your goals, apply an interest rate to it (I suggest 7%), and use a calculator to determine how much you need to save monthly to achieve your goals.  

Then, start to study behavioral finance to continue learning on your journey in investing.

Daniel Kahneman is a psychologist who won the Nobel Prize in economics and wrote Thinking Fast and Slow which opened our eyes to the reality that most of the decisions we make about personal finance are based on emotion.  The first time I heard that, I thought, “There’s no way most of my financial decisions are based on emotion.”  But the more I thought about it, I realized he’s right.  

You see, our brains are obviously very helpful in most areas of life, but they’re not super helpful when it comes to our money.  For example, when the stock market goes up, we all want to invest, and when it goes down, we want to get out.  Perfectly human, but the opposite of good financial sense.  We’re supposed to buy low and sell high.  

Here’s a practical question to ask yourself: the next time the stock market has a correction, meaning it goes down by at least 20%, what will you do?  The correct answer is usually, do nothing because I understand the market does this and will eventually go back up. Instead, our brain screams at us to sell and makes us really scared and uncomfortable.  Please know that this is how you’re going to feel.  When it happens, remember reading this and, instead of selling, just do nothing.  We’re never going to get rid of emotion.  The trick is to feel the feelings, take a breath, and let your logic take over. 

If you’re ready to get started, there are a lot of great ways to do it.  If you want to start buying and selling stocks or other individual investments, WeBull is a great place and a partner of ours.  Consider using YouCanTrade for investment resources and training. If you would like a more hands-off approach in your investing, check out M1 Finance, also another great partner.  

Now I’d like to hear from you, what are you going to do first?  

As always, I encourage you to talk with someone about what you’re working to improve.  Talk to a friend, coworker, or your favorite cousin.  

Get info on financial coaching and hop on a call.  As always, ask us anything.  

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