Has anyone tried doing this? I am debating on whether or not the idea of using what I save into either a long term savings account, OR , decide to put the savings into some "safe" stocks such as Apple, Google, Microsoft etc.
What do you all think are the benefits or downsides of doing this type of saving?
I understand there is volatility in the market and that its not a guaranteed I would make money. But if I do take a larger interest in stocks this seems like a relatively "safe" way to start saving.
Worst case scenario, I just start saving again!
I think you should start investing as soon as possible, assuming you already have adequate emergency savings and little to no debt. You may have heard this phrase before: the best time to invest is 10 years ago; the second best time is today. Translation: time is money. Invest as much as you can as soon as you can to maximize growth potential.
That said, be careful investing in individual stocks. No stock is “safe.” No exposure to the stock market is without risk—even treasury bonds. If you’re not willing to thoroughly research individual companies, and to keep up with them over the longterm, then you might want to just invest in broad market index funds, to focus more on asset allocation and dollar cost averaging your investments than trying to pick successful companies to invest in.
To me, "Savings" and "Investments" are different. Savings typically are for emergencies or something to be purchased in the near term (think 1 month to several years). Examples might be saving for an emergency, a house, a vacation, or maybe an advanced university degree. Investments should be for the long term and might include low-cost index stock funds.
Thanks for the input Mike and George.
For Mike,
I like the idea of investing sooner rather than later. My debt is more than manageable as well. I think the largest concern for me to pull the trigger on this is honestly the amount of research that I've seen consume a lot of colleagues and friends in the past as they tried get into stocks.
You make a great point that researching the stocks that I am interested is the first step I should ever do with investing my money. I haven't heard of Market Index funds but they look pretty interesting. Its definitely something ill head up if I find myself unable to commit the research into my own personal stocks.
For George,
I see your point in savings. The way I viewed savings in this case was an amount to use on a goal, which in this case would have been for investing into the stock market.
Long term savings has always been a relatively interesting prospect for me since I do tend to live in the now rather than the later. I do see the appeal in having any source of savings for emergencies and for long term goals such as a house. However I feel as though the money could possibly be spent in other sources that may provided a larger yield in a more immediate future I always have a short term savings goal in mind when I want something.
Speaking of investing, what are both of your thoughts on apps like Robinhood, or more older companies like Etrade?
They all have their pros and cons. It really boils down to what you’re looking for, what features matter to you, what you plan on investing in, your ongoing investment strategy, etc.
If you’re just starting out, I’d recommend deciding first if you’re going to invest in individual stocks, index funds, or both. You’ll also want to consider the type of investment account you want to open. If you aren’t already funding a Roth IRA, I’d highly recommend checking that out. Read up on the differences between a 401k and an IRA, and the differences between traditional and Roth accounts, specifically the differences in taxes. If your employer offers a 401k match, you’ll want to be contributing at least enough to get that full match before you open and fund anything else.
I know that’s a lot to throw at you, so I’ll stop there for now. Feel free to ask more questions, but keep in mind I’m just some guy on the internet. If you don’t fully understand what you’re doing, you should probably talk to a financial advisor and/or CPA.
Speaking of investing, what are both of your thoughts on apps like Robinhood, or more older companies like Etrade?
I've used Robinhood recently and Etrade in the past. Both are good platforms; however, my investment priorities are low-cost mutual funds, typically from Vanguard, Fidelity, or other large brokerages. My favorites are index mutual funds that provide broad market exposure, low operating expenses and low portfolio turnover.
Does anyone have thoughts on index mutual funds versus index exchange traded funds (ETFs)? In general, it seems like the ETFs have lower expenses, but I like the ease of buying and selling mutual funds. What are some of the other positives and negatives of each?
Aaron,
These days, with expense ratios of ETFs being so low, the near universal support for fractional shares, and general ease of access to the stock market, it makes little sense to choose mutual funds if ETFs are an option. There are some exceptions of course. I think fidelity has an S&P mutual fund with a cost of like 1 basis point. But generally speaking, ETFs are at best superior and at worst equivalent.
@Kevin S. The downside is that you may lose out on gains you would have made otherwise. We did this for a while during the first part of this year and even sat out some of the Dow's post-Coronavirus crash recovery because it didn't make sense to me that the market was going back up. But eventually I decided I'd just better start investing or I never would. But it was mentally hard so I have it on automatic and try not pay too much attention to it. Its being invested for the distant future.
I use index funds because I feel they spread the risk by tracking the market as a whole. But the market can still go down.
My daughter just gave me cash for my birthday and I am investing it all
