As a young adult, you may be asking yourself the question: Should I be investing my money? Also known as buying stocks, bonds, or ETFs.
Here’s my answer to the question: If you’re planning on working a full-time corporate job or have another stream of a large amount of guaranteed money, then the answer is yes.
If you’re planning on being an entrepreneur or your stream of income is a smaller amount, then the answer is no.
Again, this is my general advice. Only you know your current situation. It could possibly be an exception to the above rule. Go with your instinct.
Basically, if you invest your money, you need to allow it to grow for many years. Otherwise it is not worth the trouble. You don’t want to be watching the markets daily. All that will do is stress you out.
If you work for a large corporation, your salary is $60,000, and you plan on staying with your company for the foreseeable future, then this is a perfect opportunity to invest. However, if you aren’t sure you like your current job, I would recommend holding off.
Once you put your money into the stock market, it will be difficult to access quickly. If you suddenly have an unexpected expense and you need the money, you will first have to sell off your stocks and liquidate. Then, you will have to transfer the money from your Vanguard or Fidelity account to your actual bank account. This entire process will take about a week.
When you sell your stocks, you don’t want to sell at a loss unless you’re absolutely desperate for the money. You at least want to break even and ideally make some money.
When determining how much money you have made off a stock, remember to factor in commission expenses. For example, Vanguard will charge $7 to buy a stock and another $7 to sell the stock. If you bought a share of the stock at $120 and sold it at $135, you have actually made only $1, because you have to subtract the $14 in commission expenses from your earnings.
On Vanguard, it is cool that bonds and ETFs don’t charge commission. However, it is a much slower process to make money off these than stocks.
Investing is not a one-night stand, it is a long-term commitment. If you need all your money easily accessible, do not invest it. However, if you have the leisure of putting it away for many years, then go ahead and buy stocks.
Try to picture what you want to be doing or what you expect to be doing with your life in ten years. This will help guide your decision. Investing is cool and scary at the same time. It is not the right choice for everyone. Do what is best for you. Take control of your life and build the foundation that will take you where you want to go.