A Simple Way to Begin Investing in the Stock Market
Have you been wanting to invest in the stock market but you feel like you don’t have enough money. You may have several friends who feel the same way. It is possible you can help each other, although this plan involves a great deal of trust. You also have to have at least $200 available for each month that you and your friends follow through on this plan.
Your Goal is to Help Everyone Start an Investment Account
Let’s say you have four friends who are willing to go in with you on this investment plan. All you are going to do is pool your money together for 5 months so that each of you in turn can start an investment account with $1000. Now, if you can find a company that allows you to invest with less than $1000 starting balance that will be even better.
You’ll all draw names from a hat to determine who gets to open the first account. In that month, the other four friends give that person their share. As each month goes by each of you opens his own investment account.
It doesn’t matter if you are investing in an IRA or just an online trading account. The point is to borrow money interest-free from people whom you trust and who trust you. You’ll be more inclined to make sure you pay them what you owe them.
After Everyone Has an Investment Account, You Invest More
Once you and your friends have finished opening all your accounts with minimum balances you’ll each just start putting your monthly contribution into your own account.
You will have taken that money out of your monthly budget for five months in a row already, so you should be able to live without it. By investing more money into the stock market on a regular basis you’ll grow your investment portfolio.
Once you have doubled your money in the investment account you’ll see that it has the potential to grow faster than when you first opened it. Of course, the stock market can be very volatile so you need to be patient.
What to do if Someone Fails to Make their Monthly Donation
People do sometimes fall on hard times. Also, some people run into financial difficulties that prevent them from fulfilling their commitments. Maybe they have to cover a large unexpected expense, like medical bills or car repairs or fixing/replacing an appliance. Maybe they lose part of their income or you discover too late they have an addiction problem.
You don’t want to allow money to stand between you and your friends. Although you and your buddies are accountable to each other for this investment plan, you have at least four options that should take the pressure of whomever is hurting.
- You can liquidate the accounts that have been opened and return everyone’s investments to them
- The other members can make up the missing amount for one month
- The other members can go forward without the contributions of the person with financial distress
- You can look for someone else to join the investment circle
You should not be investing money that you will NEED or MISS from your monthly budget. Cover your rent or mortgage and all your bill payments. Make sure you have enough left over for gas, groceries, medical expenses, and necessities like clothing.
Set up a payment plan that everyone can live with. And most importantly set down the ground rules BEFORE you start pooling your money so that everyone knows what to do when something unexpected happens.
What Is a Good First Investment?
Because the stock market is so unpredictable your best bet for a first investment is to pick an index fund based on the Standard and Poor 500 or the Dow Jones Industrial Index. These index funds are managed so that their valuations follow the leading market indicators. More importantly, you’ll be pooling resources in a mutual fund that is sure to receive at least some dividends and interest, which means that even if your stock prices start to drop you’ll still see some income from the dividends.
Reinvesting your stock income into your index fund is a good strategy because that will help you build up your wealth faster. When you have acquired a few thousand dollars in your first investment fund you can start looking around for other opportunities. By then you’ll be more confident in your ability to understand how the stock market works.
