Mark Zuckerman - Stock Market Investing Bible: Step-By-Step Beginners Guide To Invest In S&P 500 Growth Stocks, Nft Stocks, Dividend Stocks, Reit-S, Options, Bonds, Etf-S And Index Funds 6 Books In 1

In this chapter we're going to be talking about how to invest your first $1,000. You have $1,000. You've decided you don't want to spend this money, and instead, you would like to invest that money, and let it grow into more money in the future. First of all, I would like to applaud you for making this decision. I can remember a time when I thought that saving $1,000 would be impossible. In fact, I can remember when my dad first showed me a hundred dollar bill, and I asked him if I could have one of those someday, if I could possibly earn one. He said, if I worked hard, I could have $100. So if you have $1,000, I'm sure you've worked very hard to save it up, and you're ready to put that money to work. I know that my first job as a waiter I made $4.85 an hour. It would've taken me about 206 hours to save up $1,000, and that's before taxes were even taken out, so you have possibly spent hundreds of hours accumulating this thousand dollars and I want to encourage you not to waste it on a gamble. I want you to invest it in something that is going to benefit your future, or invest in something that is going to likely appreciate in value. The very first thing we have to talk about before we consider investing $1,000 into anything is, what is your current financial situation like? Because about 80% of Americans out there are in debt, and it's possible that you have $1,000 in cash or $1,000 in the bank, but maybe you still have debt that you need to pay off. I know you're eager to invest your money. You're eager to put your money to work, and start earning interest, and start getting ahead, but you can't really get too far ahead if your feet are stuck in the mud. What I mean by that is, do you currently have any debt? If so, what is the interest rate of that debt that you currently have? Over the past 100 years, on average, the stock market has returned about 8 to 10%, and we're going to use 8% as a conservative figure. That's what it's returned on average per year over a very long span of time. If you know anything about the stock market, you know you're not going to get a guaranteed 8% return every single year, but that's the average rate of return you could expect to receive. If you have any debt right now that exceeds 8% interest, it actually makes sense to pay off that debt before you begin investing in the stock market. Let's say, for example's sake, that you have $1,000 invested in the stock market, earning you an 8% return, but you also have $1,000 on a credit card, and you're paying 25% interest on that debt. That $1,000 stock market investment would earn you $80 over that year. Meanwhile, you would be paying your credit card company $250 in interest, so you're actually not getting ahead here by investing in the stock market and it would make more sense to pay off your high interest debt first. If you've taken stock of your current financial situation and you find that you have high interest debt, you need to pay that off before you start investing in the stock market, or investing in anything out there just due to the fact that you're not going to get a return that's going to likely exceed what you're paying in debt. It's going to make a lot more sense to pay off your debt first before you begin investing and start off debt free before you start putting money into the market. One question you might have is, what if you have a car payment, or what if you have a mortgage on your home? Let's say that interest rate is around 4%. Well, if you can earn about 8% in the market, and you're paying 4% to borrow that money, you're still making a 4% return by investing that money in the stock market. So in that situation it would actually make sense to invest while having low interest debt. I'm not saying you have to be completely debt-free. You may decide to do that, but I am saying that you should pay off your high interest debt before you begin investing in the stock market. The second thing I want to discuss here is why people end up going into debt. Do we just wake up one day, and decide that we want to put $3,000 on a 25% interest credit card? My guess is absolutely not. This usually happens during a time when we're in a crisis mode. Maybe you can't afford your groceries or your utility bill, or you need to buy new clothes and it's a necessity. Usually, this happens out of necessity and not out of want or need. If you are going into debt due to wants and needs, then you really need to think about what is more important to you, that short term gratification, or the long term gratification of investing? The fact that you're reading this book tells me that you at least have some interest in investing for your future and you really need to think about what's going to be more important for you; that brand new pair of jeans or investing in saving money and building wealth for yourself for the future. After you pay off your high interest debt, the very next thing that you want to do is prevent the need for debt in the future and that is by putting together a cash cushion. This amount is going to be different for everyone. For me, it's $10,000. I always keep $10,000 of liquidity in my checking account no matter what because I don't ever want to be in a situation where I'm going to go into debt or have to pay interest to somebody else out there. This all depends on what your cost of living is and how much money you're spending each month. What I recommend is having enough money on hand to cover all of your expenses for three to six months. Put yourself in this situation. You lose all of your sources of income tomorrow. how long would you be able to sustain yourself? If that answer is one week, if that answer is one day, then you need to put together a cash cushion to prevent the need for going into debt in the future. This is a mistake that I made myself. I used to invest all of my money into the market. I used to keep $1,000 in checking. I can remember a situation where I ended up having to pay for a car repair. I had to spend $1,500 fixing my car. I had $600 in checking, so I had to sell some of my stock market investments, and luckily I didn't lose any money, but if I was in a situation where my stock market investments were down and I had to sell at a loss in order to get that money to pay for my car repair, I would not be in a good situation. Now that we've covered the two most important parts here, which is paying off your high interest debt and building a cash cushion, let's actually talk about how you can invest and put your money to work. The very first thing I want to discuss is investing in individual stocks, or buying stocks of companies. How do you pick a stock out there? How do you find out what stock to invest in? Well, what I recommend to you is, keep it simple. Think about investors like Warren Buffett. They invest in very simple businesses that they actually understand. You don't hear about Warren Buffett investing in biotechnology companies, or the brand new hot tech IPOs. He invests in well-established financially stable companies and I encourage you to do the same as a beginner in the stock market. What I would recommend is picking one to two different companies out there that you truly believe in, that you want to get behind, that you want to be a part owner of, and buy some shares of those companies. Why do I recommend just investing in maybe one or two companies? It is because I don't want you to spread yourself too thin. I've had a couple of friends who told me they're investing in 50 to 60 different companies, and that is just way more than anyone could keep track of. Companies are going to be reporting their quarterly earnings four times a year. They also release their annual reports. Imagine if you're trying to keep up on the earnings reports of 50 different companies. That means you're going to have to be reading 200 different earning reports each year and listening in on these earnings calls. If you're not doing these things, you're not really being a good investor because you're not keeping track of your investments. If you decide to invest in a company, you should stay on top of things. You should listen to the quarter ly earnings calls. You should read the annual reports. If you're investing in 50 or 60 different companies, it's going to be more than you can likely keep track of. I would say pick one or two companies, businesses you can easily understand, your favorite companies out there and be a proud investor of that company, and spend a lot of time learning about that company and continuing to keep track of their progress by keeping track of earnings reports and reading annual reports.