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How To Invest Your First $1K: Step by Step
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Mar 1, 2024
#money #investing #blackexcellence WATCH: How much to save at every age: https://www.youtube.com/watch?v=zy1bBUbll38 Brokerages: https://www.fidelity.com/retirement-ira/roth-ira https://investor.vanguard.com/accounts-plans/iras/roth-ira If you've never invested before, today is the day to start! In this video, we discuss what to do before you even start investing and the various ways to invest. Check out the books we love and recommend in our Black Excellence Book Club: https://www.blackexcellence.com/store/ Some links are affiliate links, which means we earn a very tiny commission if you make a purchase. __________________________________________________________ BlackExcellence.com is a digital platform dedicated to empowering excellence everyday through sharing thought provoking, informative, entertaining, and noteworthy stories in the Black community. All content provided by Black Excellence Media, LLC is for entertainment purposes only. None of the information or advice provided is to replace professional advice.
View Video Transcript
0:00
When you hear the term investing, do you get scared
0:03
Do you have nightmares? Well, you don't have to. In its basic form, investing is simply using your money to make more money
0:10
If you've never invested before or you're just getting into it, well, this video is for you
0:15
We will discuss the basic steps of investing, what to invest in, and where to even get started
0:21
If you have $1,000 saved up and you're wondering if it's even enough to start investing, well, the answer is yes
0:26
You can invest with even $100, but there are a few steps you should check off your list before you start doing your research on what to invest in
0:35
And of course, the very first person you should invest in is yourself. Also, in a lot of our other videos, I'm always talking about do you have an emergency fund saved up
0:44
This is such a crucial step because if you don't have an emergency savings, you're re-exposing yourself to falling into debt, most of the time with a ridiculous high interest rate
0:54
According to a new report by LendingTree, 93% of Americans have faced a financial emergency
1:00
Who are the 7% that's never faced an emergency? How boring. And 49% of them admitted they wouldn't be able to cover a $1,000 emergency using only cash or their bank account
1:11
They would have to turn to those things we all love called credit cards or loans
1:15
If you fall into that 49%, the first thing you should do is save up that cash for an emergency
1:22
you can open up a high yield savings accounts, most of them are online or your bank has them
1:28
where you can earn 4 to 5% interest on your money. That's really not that bad at all
1:33
This way you can keep your cash for an emergency and still earn interest on it
1:38
So you can qualify that as an investment too. Step number two is paying off all that debt you collected
1:43
revenge traveling, revenge eating, revenge shopping after COVID. If you have credit card debt
1:50
that should be the first debt to go because it's likely the one with the highest interest rate
1:55
Let's look at some simple math. If you invested in the stock market, you can reasonably expect to make 6% to 8% on your money
2:02
in an average year. But how much is the interest rate on your credit card
2:06
Well, more than likely, it's at least 18 to 20%, and some people credit card is even higher than that So the money that you repaying on interest alone for your purchases on your credit card is double And for some of you it even triple the return you would get by investing
2:21
The best thing you can do if you're in that situation is to stop the bleeding first by paying off as much of your debt as possible with extra cash you get until it's all gone
2:32
Again, especially credit card debt. This is the worst. Okay, so you have the first two steps completed and still have an extra
2:40
thousand dollars now we can get into what traditionally can be considered
2:45
investing one of the best things to first do is to open up some type of retirement
2:50
account if you work for a company that offers 401k make sure you have an
2:54
account and contribute directly from your paycheck to that account some companies are even generous enough to do some type of contribution matching
3:02
which means they will either contribute the same amount you're putting into your retirement account good luck finding those companies these days or they will give you a
3:10
percentage of it. That's free money going directly into your retirement account. Look into it
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ask about it, do it. Another option and my favorite is to open up your own retirement account like a
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Roth IRA. In fact, you can have both a 401k and a Roth IRA. A 401k is an employer-sponsored
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retirement plan, but a Roth IRA is something you can open up yourself. I personally believe
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everybody should have a Roth IRA account regardless of them being an employee or an independent
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contractor like myself. The Roth IRA is an individual retirement account and has different tax benefits than a 401k
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We'll get into all the specifics of that in a different video. You can open up a Roth IRA account with brokerages like Fidelity and Charles Swap
3:54
If you've never heard of these brokerages or don't even know what the heck a brokerage is
3:59
have never even heard the word, we will talk about that in a separate video. But for now, I will leave a link in the description box to the websites so you can at least start checking them out and getting a field
4:09
Now let's talk about investing in the stock market through a brokerage account that's
4:14
not a retirement account. I say this to make it clear that your retirement account will most likely be invested in
4:20
the stock market too, but you can also invest in the stock market outside of a retirement account
4:25
With your that you have saved up you can buy stocks in either individual companies I don recommend this for most people like Amazon Tesla or Apple or buy something I love called index funds
4:38
Index funds are a collection of companies, all bundled up in one happy, lovely package
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I highly recommend investing in index funds, and I recently did in a detailed video on what index funds are
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and why they're the best, safest choice when it comes to investing in the stock market
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You can find that video somewhere up here. You guys know the routine if you haven't watched it yet
5:03
You can open up an investment account in any of the popular brokerages like Vanguard, Fidelity, or Swab
5:09
Remember, investing in the stock market should be a long-term goal. If you're older or getting close to retirement, you could consider investing in something called a CD or a certificate of deposit
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This is a deposit account that earns a fixed interest rate for a specific amount of time on the money you deposit
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The reason why I like CDs for investors that are closer to retirement or older is because the stock market varies from year to year
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So if you're going to need your money within a short period of time, one to three years, then you might invest in CDs depending on what the interest rate is
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Right now, you can get a CD for about 5%. So let's say you had $100,000
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At the end of the year, your bank will give you back $100,000 back
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That's your principal. And then they will give you back an extra $5,000 for the CD that you purchased
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But something I want younger investors to remember is if you continue to invest in CDs
6:07
you're going to probably miss out on a lot of gains in the future. You're going to miss out on that 6 to 8% that you could have invested in the stock market and got
6:16
So you would have got $8,000 on the $100,000. that you invested. Last year, the stock market, and this is American companies, returned, I believe, around 20%
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So you would have missed out on 20%. The reason why CDs are good for people who need their money in the short term is the stock market can also drop by 50%
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If you invest for the long term you will more than likely make your money back which means the stock market will recover and it will start making you money on top of the money that you invested So like I said these CD accounts earn a fixed interest rate for a specific amount of time on the money you deposit
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The length of the terms can range from three months to five years
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and the longer you leave the money in there, usually the higher the interest rate you earn is
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One catch to these type of accounts is, unlike the high interest savings accounts
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I mentioned earlier, you cannot withdraw your money before the end of the term you agreed to
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If you do really need to take your money out prematurely, you usually face an early withdrawal penalty
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If this sounds good to use several banks offer CDs, check out if yours does or simply research the ones that do
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I would definitely check around because different banks offer different rates. Last but not least, let's talk about another one of my favorites, building your own business with $1,000
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There are a ton of side hustles you can start for $1,000 or even less than that if you're willing to commit the time
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Want to start a YouTube channel? A lot of people start by just filming on their phones and investing into a decent microphone
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for good audio quality and some cheap light. You can definitely get all of that for cheaper than $1,000
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Are you good at handmade items others would be interested in buying? You can get started on less than $1,000 and selling on websites like Etsy
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We have a video on some high earning side hustles, and most of them can be started for less than $1,000
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You know the routine. Check it out somewhere up here. So the moral of the story is you can get a much higher return on your $1,000 if you start a successful side hustle than investing in the stock market
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If this is something you've been thinking about for a while, especially if you're young, freaking just go out and do it already
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Obviously, there are countless ways to invest your $1,000. I hope this video was helpful in just guiding you to some of those options
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Remember the first couple of steps before you invest anything is to make sure you have an emergency fund
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and you have paid off your high interest loans that drain your money every single
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freaking month. Speaking of savings, there is an important video I did on how much money you should have
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saved up by 30, 40, 50, and above that I think you shouldn't miss
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I'll leave that link below so that you can see if you're on track to save that recommended
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amount of money. Well, that's all I have for today. I'll be back next time with more money talks
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