How to Start Investing in the Stock Market?

This is post #15 from the 30 Day Personal Finance Challenge: Boost Your Financial Health with a Daily Tip!

So far I have been writing exclusively about the right money mindset, knowing where you stand financially, reducing expenses, building an emergency fund and saving as much as possible. But this is only one side of the equation!

You don’t want to leave your savings rot in the bank and get eaten up by inflation. The interests of saving accounts are at all-time-low and further dropping. It’s inevitable to ask yourself:

What do I do with all this money?!

Trust me, I have been there. Real estate was and still is too big of a deal for me. Starting a business/side hustle is one of the options, but it’s not somewhere where I will put all my savings into. I invest in my development and further education but it still doesn’t solve the idle-money-in-the-bank issue. It’s a good issue to have, by the way…

To reach financial independence you need to make your money work for you and make you even more money! You gotta INVEST! – Kate App

Here is what I did: I opened a brokerage account and started investing in the stock market! My primary focus is on ETFs (exchange-traded fund). ETFs hold assets from various companies and industries, they are passively managed and thus low-cost and relatively secure. I have a monthly savings plan which automatically buys DAX ETF (a stock market index consisting of the 30 major German companies).

I also buy individual stocks from companies who are leaders in their field – mostly tech, telecommunications, automotive, and pharmaceutical. It’s my third year and I enjoy double-digit growth.

I am into it for the long term. I buy value stocks and ETFs which I intend to keep for decades. Most of them pay dividends, which I re-invest. My portfolio grows because of the compound interest effect.

It was very intimidating at the beginning and it still is, but:

The KEY is to start small and learn your way in step by step.

I wish I had started earlier! In my ETF strategy, it is important to invest continuously and steady over a long time in the market lows and highs. It doesn’t need to be big amounts, 50-100 bucks a month is a good start.

Don’t let your ignorance or fear stop you – yes, the stock market is risky and unpredictable. Yes, you hear stories about people having lost all their money. But ask yourself if these people followed one simple rule:

Don’t put all your eggs in one basket!

There are professional investors, but it doesn’t mean you can’t work your way in! Most of all, you don’t need to become an astute investor overnight! It’s a long learning process, but in the end, you will be grateful you started it in the first place.

How to start investing?

1. Contact your bank and ask them what investment options/brokerage account they offer. Be aware that the banks try to sell you their products and services which you don’t necessarily need.
2. Make a thorough online research on what other banks/institutions offer.
3. After you have all the data, compare and pick the one with the best conditions. Usually, new investors benefit from lower transaction costs in the first year.
4. Open a brokerage account! This is a BIG one! It took me many years to gather the courage to do it, I kid you not.
5. Play around, get familiar with the interface.
6. Select a low fee index fund, and set an automatic monthly savings plan. 50 bucks is a good start.
7. Start educating yourself.
   This is a good start: 20 Essential Stock Market Terms for Beginner Investors

It will look intimidating and you will be freaking out because you still remember the stock market crash of 2008 and the dot-com bubble, but nevertheless, DO IT! Remember you are not losing anything. Even if there is a sudden crash, the risk with ETFs is relatively low, and unless you panic and sell everything, your loss will be minimal.

It’s a learning experience and a path leading to financial freedom. You don’t need a professional broker to do your investing for you. We live in an information era – you can do anything yourself! Plus, you have all the information available on how to run your investment portfolio.

Why do I invest in DAX ETF?

• In the last 26 years, DAX has an average yearly return rate of 9%
• Germany has one of the world’s strongest economies
• It is a liquefiable asset – it can be converted into cash in a short time
• It is passively managed – it has very low fees

Benefits of opening your brokerage account:

• freedom to make your own decisions
• the investment is highly liquefiable – means you can exchange your investment for cash any time if a case of emergency (something I wouldn’t recommend)
• it’s intimidating at first but with the time you start to learn – you don’t have to know it all at the start
• you can set automatic saving plans

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Disclaimer:

I am not an investment consultant and all the opinions I share are from my personal investment experience. I learn by doing, and I try to keep the risk at a minimum. So far I enjoy double-digit growth of my portfolio. This doesn’t mean it will always grow at this rate, but I am in it for the long run. 
Before taking any action, do your own research – all the information you need is a google search away.

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Photo credit: Fotogestoeber