I don’t have much money to invest, should I bother?
If you don’t have a whole lot of money to put in, that’s fine. Put in small amounts of money into stocks and use it as an opportunity to learn. Even if you’re a genius you’ll only be able to turn $100 into $150 in one year, so don’t worry about making big gains if you don’t have a lot of money to start off with – focus on learning. You will learn a lot more once you put actual money in (regardless of the amount) because you will start paying closer attention to things, so just get some money in there. So by the time you save up more money to invest with in the future, you’ll have a lot of knowledge behind you and you can invest more money with more confidence. By having learned with smaller amounts of money, it will also mean that your mistakes won’t cost you big money. By the time you have bigger sums of money to invest with, you would’ve made a lot of mistakes already and so won’t make those same mistakes with bigger sums of money.
How should I start out?
ETFs are the easiest way to start out. Check out the ETFs page to read about each one and pick the ones you like. ETFs are relatively safe and give you the returns of the overall market. As you find individual stock opportunities as you learn and gain confidence, then you can slowly start to look at buying individual stocks. Start out with relatively small sums of money so that if you’re wrong, which you will inevitably be at some point, it won’t cost you a lot. This is why I recommend Interactive Brokers as their trades range from $1 to $6, whereas CBA stock accounts charge $25 per US or European trade – so you can invest $50 on your Interactive Brokers account and the fee of a buy and sell can cost you as little as $2, whereas on your CBA account it’ll cost you $50, making you feel like you have to invest more to make it worth it. So try investing in individual stocks with very small sums of money at first, because when you have your own money in you will pay a lot more attention to things and you’ll learn a lot quicker.
I’m hesitant about putting all my money straight into the market (whether it be ETFs or individual stocks), what should I do?
Nearly everyone faces this hesitancy when first getting into stocks – they’re nervous about putting all their money in all at once. The reality is that you don’t have to put all your money in all in one hit. Something that will make you more comfortable is to buy the ETFs (or individual stocks) in small pieces, and buy each piece gradually over time. For example, if you have $5,000 to put in, maybe you can put $1,000 in every month for 5 months. That way you aren’t hesitating about what day to put your money in, because it’s stretched out over time and a lot less confronting.
What are the risks of investing outside of Australia?
There are none. It may seem scary at first to invest in overseas companies with foreign companies, but the reality is that it’s the same as investing in Australia, but with more diverse and higher quality options. It may take you some time before you’re comfortable doing this, and that’s fine. Just don’t ignore it as an option altogether because the best opportunities are abroad – the Australian market is pretty starved of opportunity.
What if the stock market crashes?
No one can ever predict when the stock market will crash, so don’t bother worrying about this. If you do, you’ll just be sitting on the sidelines waiting for the next crash which could be years away – meaning you miss out on all the gains in-between. It’s an inevitable part of investing and it tends to occur every 10 or so years. The reality is that, at least in the US market, even if you were unlucky enough to buy stocks right before one of the most horrific crashes in economic history like the Global Financial Crisis of 2008-09, you would’ve broke even after just over a year. Sure, that sucks, but you still would’ve gained 140% over the next 10 years. So no matter what, in the long-term you can enjoy the stock market’s 100-year historical average of a 10%pa gain. If you’re really scared about a crash, then just buy a set amount of stocks or ETFs every month regardless of what’s going on in the world, and that way you’re averaging out the risk of a downturn