How to start investing? An automated way

If you are just beginning to start investing, it is really easy to get lost in all the different methods and information.

“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

– Warren Buffett

Start by educating yourself

First of all, you need to start educating yourself so that you don’t get lost in the short term fads. Here are a couple of books that are highly recommended by all-time best investors like Warren Buffett:

Additionally, do the following to increase your financial literacy:

  1. Open up a glossary of investment terms. Example: JP Morgan
  2. Start reading the glossary by a letter a day. Example: Start with all the “A” terms on your first day, and “B” terms on your second day.
  3. Every single day read the terms for the subsequent letter until you finish your glossary in 26 days.

When to start investing?

You might be saying “I’m waiting for the best time to start investing”. As Warren Buffett stated above, the best time to start investing NOW!

How much of your income to start investing?

Many investors recommend investing between 10–30% of your income before you start making any “unnecessary spending”. In other words, before you spend a penny after a paycheck, you would deposit 10-30% of it directly to your investment account.

Luckily in 2019, there are a couple of apps that help you automate your investing process which forces you to invest before you choose to spend it on something else.

An automated tool to start investing

My favorite automated investment tool so far is Acorns which is an app that rounds up your change from your transactions and invests it into an index fund such as the S&P500.

The S&P500 average return rate over 90 years is currently at 9.8% compared to your banks saving account return of 1%.

How does it work?

For example, if you get a cup of coffee for $2.25, it rounds the price to $3 and invests the $0.75 into your investment account.

The average Acorn user invests around $50 just with the roundups. You can also, set up scheduled investments such as $5/day or $100/month.

What is your earning potential?

For example, if you end up investing $50 in roundups and $10/day with scheduled investments, in a month you will have invested $350 (30*$10 + $50) which is $4,200/ year.

  • If that $4,200/year were to sit at your bank account, in 10 years you would have:
    • $44,380.71 (assuming 1% interest rate/year) –> that is only $2,380.71 earned in interest.
  • If you invested the same amount on Acorns, in 10 years you would have
    • $62,091.12 in your account (assuming %7 interest rate/year) –> that is $20,091.12 earned in interest.

Make this 20 years and you really start seeing a difference:

  • Bank account in 20 years: $4,200/year → $93,404.61
  • Investment account in 20 years: $4,200/year → $184,233.74

That’s almost double what the bank gives you, or you holding on to your money in the savings account.

The key is to start investing now and keeping it consistent. You must always keep looking for additional resources and have the stomach to bear with the regular transactions of the markets.

NOTE: This is not a get rich quick scheme but a long term growth strategy.

If you are interested in more investing related tips check out How to Build a Stock Price Alert Using Python