One side effect of the pandemic for my family (and likely yours) is our dependency on Zoom.

We probably could have taken advantage of Zoom before because we’re spread across multiple states. Nonetheless, stay-at-home orders forced us inside. My younger brother is a financial investment professional. He has been for years. Looking for something productive to do, we decided to pick his brain.

Family Financial Chats

In April 2020, we started weekly Zoom calls. Each Sunday afternoon, we’d jump on a Zoom call and just ask him questions. There wasn’t a formal outline. He did start us off with some general knowledge details:

• If you have a retirement account, you’re an investor.
• If you’re looking for a place to start, start with a company-sponsored investment account and at least contribute a percentage of your salary that equals the company’s match.
• You’re probably in better shape than you think.
• Use this formula to estimate your investment goal amount: (monthly expenses *12) / .05  (* reasonable withdrawal rate*)
• Don’t forget to include Social Security in your retirement income projections.
• You have time to reach your goals.

Outside of retirement investment accounts, I hadn’t focused on stocks as a part of my overall investment strategy. It’s always been something I plan to get to…one day.

Being forced to slow down for the past year has created an opportunity to do just that.

I’m going to condense our last year of Family Financial Chats for you into one post. Then, I’ll give you some ideas of how to start your own – even if your younger brother doesn’t work in the finance industry.

 

What is Investing in Stocks & Mutual Funds

Let’s get on the same page. Investing is essentially allowing a company to use your money in exchange for sharing in future profits. When they make money, you make money. If they lose money, well that’s the risk you take in investing.

You can invest directly in a company by purchasing stocks or shares of that company. The stock price fluctuates based on how well the company is doing and what the market (i.e. the universe of investors) thinks that the company is worth.

The number of stocks you purchase represents your percentage of ownership.

You can invest in mutual funds. This is basically a collection of companies. Companies are grouped for various reasons. Mutual funds can be made up of companies that belong to similar industries (like technology or health care). Mutual funds are ideally supposed to spread the risk of losing your money over many companies.  They also get a little more interesting because they have fees. We’ve learned to look for “no-load” mutual funds or funds without management fees.

You may wonder why anyone would buy a fund with fees. I’m told that some funds are actively managed by professionals. One might feel more comfortable knowing that a human begin is directly engaged in monitoring the performance of a fund.

The final thing I’ve learned this year is about index funds. You’ve heard the terms Dow Jones or S&P 500, These are indices (indexes lol) that track how certain portions of the stock market are performing.

When the S&P 500 is up, you’ve likely made money. If it’s down, you get the idea.

Investing in index funds can be a low-stress way for novices to get started. I bought a Vanguard index fund last year (VOO). No complaints.

Investment Philosophies

There are many strategies related to investing in the stock market. Too many for the average mortal to master.

I joined an investment club in my 20’s. It was a good start. But, my attempts to start investing again always fizzled. The amount of information available can be overwhelming.

One thing I’ve learned over the past year, there’s no need to know everything!

My brother has been encouraging us to:

• Consider where you spend your money already – regularly.
• Consider which brands you already use, know, understand, and love.
• Open an investment account.
• Buy 1 stock.

Even Warren Buffet – the Oracle of Ohama (a very wealthy, successful, and wise investor) – encourages people to invest in what they know; avoid investing in what you don’t understand. Investing doesn’t have to be complicated.

My brother says if you understand how a company makes its money and expect it to be around in the next 5 years, then the company may be worth investing in.

I’ve been a paying Zoom customer for almost 5 years. I never thought to invest in it. Boy, did I miss an opportunity!

What companies have you been a customer of for years?

He’s right about purchasing 1 stock. The moment I did that, I started paying attention. Then I bought some more. This is my current (non-retirement) portfolio. Nothing fancy.

My total gain for the year is $3,376 (36.15%). That’s much better than having left that money in a savings account.

As you can see, the companies I chose included Apple (AAPL), Ford (F), and Southwest Airlines (LUV). I either am familiar with the products/services, believe in the mission, or use the service personally and am a loyal customer.

My 2021 goal is to bump the balance up to $20,000.

I’ve read that a stock portfolio should have 10-15 stocks to be considered well balanced. My brother suggests we invest with a goal of reaching 100 squares in any company.

You can see, I have some work to do. It’s a process.

 

Invest as a Regular Habit

I personally suggest that you start any non-retirement investing after paying off consumer debt and creating a full emergency fund. Trying to accomplish too many things at once will dilute your momentum.

However, that doesn’t mean you can begin to start learning about various investment options or strategies.

I like the Motley Fool as a place for beginning investment advice. I also love the Robinhood Snack Tips email newsletter. I know they’ve had a dustup in the media. You can join the email list without downloading the app or using their service.

If you want to start investing with no risks, Robinhood offers a free stock just for signing up. My free stock, PLUG, grew from $5 to a high of $75 earlier this year. It’s now back down to $38. But you can’t beat a free stock.

Once you’ve accomplished your savings or debt-free goals; then you’ll be ready to take the next step. Building wealth!

I looked at a number of trading platforms. They all offered free trades, but there are some subtle differences:

I opened a Robinhood account for the free stock. However, I primarily use E*Trade because we already had one account and I didn’t want to manage a third. I don’t like that they don’t offer fractional share purchases yet.

Fractional share purchases are a way to buy very expensive stocks, like Amazon, in small bites.

As an interim solution, I could buy fractional shares through Robinhood and transfer them. I just haven’t.

 

So That’s It

That’s the basic gist of beginning investing. Not super complicated. Not super sexy. Definitely doable.

You may have access to a financial planner through your bank or your employer. Some feel more comfortable working with a professional. It’s still helpful for you to have a basic understanding so you know what questions to ask.

If you don’t have a financial professional on speed dial, you can still take advantage of family financial chat sessions.

• Reach out to a few financially mature friends or family members and propose that you all learn together.
• Set a time to meet via Zoom or your favorite video conferencing tool. Even if you’re in the same city – Zooming saves time. People are more likely to stay engaged if it’s easy and doesn’t become a chore.
• Come up with a list of concepts you all would like to learn and then have one person present on that each week. Google your topics and learn from the masters. Learning leads to more questions and more topics to research.
• I would recommend 1/month. We started out weekly, but have moved to 1/month and that gives me more time to let the topics marinate. It also gives me time to act on anything that I’ve learned.
• Appoint the wrangler. The person who’s going to remind everyone about meetings. Life gets hectic and some in our circle are better at staying on top of schedules and communication.
• Have fun with it. Buy your 1 stock and go from there.

 

Let me know what free stock you get in the comments below.