Let’s be so real; money can be a scary thing to talk about. How to make it, where to put it, and what to do with it are just a few of the many concerns that surround personal finance. Growing up, everyone would often say “Save your money!”, but the idea of spending to save is now on the rise. Investing has been one of the most common ways to spend yet also make money in recent years. It can be confusing on where to start and how to get the most bang for your buck in this process, but after talking to many UCLA students who take pride in investing, we’ve established a simple yet effective beginners guide to this financial art.
It’s crucial to do thorough research on where exactly you would want to invest. Two main outlets of investment are stocks and crypto. Stocks are essentially a share of a public company’s ownership, so by purchasing a “share” of stocks you basically become a partial owner of a company and grow on your investment when demand for a limited amount of shares exceeds the supply. On the flip side crypto is a digital monetary investment that doesn’t need some central bank to control any transactions. Stocks are known to be a good long-term investment since it’s usually reputable companies that grow and expand over time, whereas crypto is a quick way to make (and potentially lose) money by constantly buying and selling “coins”. If you’re looking for a somewhat safer and low maintenance investment that takes patience to profit, stocks are for you! But, if you want a quick and diversified investment that requires a little more attention, then crypto is the way to go.
Stocks
The stock market has an intimidating and boring reputation, but it can also be a fun way to watch how your money can grow through market changes. In stocks, and in almost all investments whether it be in a designer handbag or company equipment, it’s MOST important to note that no investment is always a sure bet. Starting early in investments (no matter how much you decide to commit to) is always a great idea, because as time goes on, your return will have more potential. Also with the amazing aspect of compound interest, you are almost guaranteed to earn whatever you make off of your investment AND the interest that compiles on that share over the years. The first step in the stock investment process is to open a brokerage account, which is an account that allows you to set aside money to buy and sell a variety of investments including stocks and bonds. Charles Schwab and J.P. Morgan are a couple of the many places that you can open a brokerage account if you’re more interested in personally managing your investment. With updated technology, there are robo-advisors to aid in the investment process such as Betterment or Fidelity.
After you open a brokerage account, it’s time to calculate how much you actually want to invest. Now, this can seem terrifying, but there are a couple rules of thumb to help. One is to invest around 15% of your annual income into different stocks. Different is a key term because you don’t want to put all of your eggs in one basket, just in case the return on your investment is extremely low for one share. Also, investing $50-$100 per month can be a great investment that has potential to grow overtime, but isn’t a huge commitment. Once you settle on a good designated budget and measure your risk tolerance, it’s time to buy your first share!
Now, you just buy your shares from whatever online or app-based broker that works for you! There are several different outlets to choose from, so personalized research on the options is definitely useful and crucial in this process. This can get fun when you’re scrolling through the Wall Street Journal to see what stocks are rising and falling, as well as which ones have reputable growth. Some reliable ones can be Microsoft, Nasdaq, and the Dow, but you can even invest in your favorite companies like Lululemon just for fun! After all of this extensive research and calculating, it’s time to sit back and relax. Monitoring your portfolio is super simple if you get the hang of the observer tools on your designated broker’s website and stay up to date on news relating to the shares of stock you have. Once you see your stock increase significantly, you can sell your shares to lock in profit, or just keep holding until you want to cash out.
Crypto
Don’t want to wait months or even years for a significant return on investment? Maybe take a look into Crypto! Although it’s a bit more demanding on a day to day basis, investing in crypto has so much more potential to profit since it’s more volatile than most normal assets. Right now is definitely the time to get into this sector of investing since the entire big crypto market, including bitcoin, is skyrocketing, meaning that it’s the perfect market circumstance to get started. Investing in crypto is a lot less straightforward than most other investments since it is such a fast paced process, but we’ve gathered some insightful ways to start from UCLA students!
First and foremost, get coinbase to have a platform that securely allows you to sell and trade cryptocurrency. This is the way that you’ll essentially be compensated for your investments, so it’s super important to establish this before beginning the process. Once you’ve gotten coinbase, you’ll probably want to create a crypto wallet, which is the means by which you hold and store your “coins” to sell and trade. A good place to start with a crypto wallet is Phantom! Now, before you actually start putting money into actual coins, it’s a smart idea to mock up the process with monopoly money. Similarly to investing in stocks, you want to be cognisant of how much you are willing and able to invest, as well as your risk tolerance. Online platforms like Roostoo and Crypto Parrot are very helpful sites that can assist you in becoming more familiar with the trading process before you’re actually comfortable with using real money.
Once you build up the confidence to invest actual money, you can buy your first coins! In order to know what exact coins to buy, you’ll want to tediously monitor your Twitter feed, since that’s where a lot of the influence goes into the coin. Basically, the value of most coins is directly influenced by the attention it’s getting, so if you’re monitoring Twitter you’re highly likely to invest in a profitable coin. From here, you just continue to monitor until you’re comfortable with selling, depending on how tolerant to risk you are.
Some key pieces of advice when investing in crypto are to be grateful, because although there’s so much room for profit and gains, there’s also an equally high chance of losing money. Don’t be influenced by the success of your friends and peers since everyone has different levels of risk aversion and comfort in selling or buying. Emotionally acting on your investments can majorly have negative effects on the potential outcome. Your investments are tailored to you at the end of the day, so just do what you are comfortable with! Lastly, staying up to date and involved in the coin trends is crucial since it is almost like a language telling you when a good time to take action is.
Risk taking can be scary, no matter what the circumstances are, but investing is such a great way to make money and gain a greater understanding of how markets operate. Whether you decide to go with the traditional stock market route of investing, or the more trendy outlook on cryptocurrency, the opportunities to make money off of your own money is such a cool experience. Investing is really what you make of it, so even getting into it with baby steps will have some sort of positive result, especially if you diversify these investments. Even if you ever had the slightest interest in investing, just jump in and invest a tiny fraction of your savings. Hopefully you now have a better understanding of a couple of different ways to start this process, and see how money talk isn’t always terrifying!