Right now a little more than half of Americans have money invested in stocks. While that number seems substantial enough, it is actually down from the average of 62 percent of Americans who had money invested in the period between 2001 and 2008, according to a 2017 Gallup report.
The last decade has been mercurial in the investment world, so it’s no surprise people are hesitating to buy stocks.
Individuals have far more concern over losing their investments than they have faith in becoming rich overnight. There is a silver lining for most people. Learning how to gain wealth in stock is not about acquiring it now, it’s about building money over time, according to longtime investor and financial analyst Tom Drake.
“With the right approach, you can get started investing with a small amount of money,” said Drake, who runs MapleMoney, a financial education website. “But you have to be consistent over time. If you look at successful investors, you can see they have an investing plan, and they increase their contributions.”
If one is saving money and looking into investment strategies, or hoping to expand their portfolio, the best thing they can do is research.
In most cases, knowledge is power, the expansive world of investing is no exception. In fact, when starting out in investing, it might seem hard to imagine someone knowing enough before jumping in. People scour the internet for the best stocks, the best investment strategies, and the best broker to execute their well thought out plan; sometimes all of that research just leaves them knowing a little about a lot, and utterly confused.
Oftentimes, what a person really needs is some advice from someone they trust. Although not everyone has an uncle that has made a killing in stocks, everyone has access to advice from some of the biggest names in wealth accumulation, and investing.
When people think of someone that’s successfully invested in stocks, Warren Buffett is at the top of the list.
His investment strategy is to use index funds to avoid too much buying and selling. “Stick with big, ‘easy’ decisions and eschew activity,” wrote billionaire and value investor Warren Buffett in his 2017 letter to Berkshire Hathaway shareholders.
Mr. Buffett revealed his sole investing decision over the course of a decade was to sell bond investments, and purchase more shares of Berkshire Hathaway. He said he relied “neither on research, insights, nor brilliance,” and that the decision was an easy, “kindergarten-like analysis.”
When it comes to knowing which stocks to invest in, Money magazine called Sir John Templeton “arguably the greatest global stock picker of the century.”
His investment strategy is maintaining a diversified portfolio.
A pioneer in investing, and also one of the most successful investors of the last century, Sir John Templeton created a number of the most prolific international investment funds. He offers a wealth of great advice for both the seasoned and novice investor in his book, 16 Rules for Investment Success, published by Franklin Templeton Investments. He suggests investors “diversify in stocks and bonds, as in much else, there is safety in numbers.” He suggested looking at the industry, risk, and country.
These days, a number of investment professionals and financial experts use Modern Portfolio Theory as an approach to helping people diversify their stocks and bonds based on time frame, and risk profile.
“For most investors, concentrating on a few index funds that include investments from different industries, as well as an all-world fund to get international diversity is enough,” said Drake. “You don’t need to over-diversify. Just stick with some basic stock and bond funds, and maybe put in a little real estate or cash, and you should be fine.”
If a potential investor wants to know how to make money with stocks, they need to automate their investments, says life coach Tony Robbins on his website.
Mr. Robbins suggests deciding on a set amount of income that can be set aside for investing, and then creating a way to guarantee that amount is automatically saved. Automating one’s investments can be as simple as using the retirement plan offered by one’s employer.
The Bureau of Labor Statistics reports a defined-contribution plan such as a 401(k) is offered by 47 percent of America’s companies. Some companies will match an employees contributions up to a certain percent. If one is already enrolled in a retirement plan, Mr. Robbins suggests people increase their contributions to match their chosen income percentage.
If one’s company does not offer a retirement plan, and they are self-employed or a contractor, Mr. Robbins suggests “You can set up a retirement account with a bank or financial institution. Then just set up an automatic transfer from your checking account.”
Financial advisor Suze Orman’s advice on saving money changes the way people think about how they spend and save.
Ms. Orman suggests people look at saving money as a thrill, and be satisfied with their savings approach. “It can be very satisfying to watch your money grow,” said Orman. “Think about it. You set aside a couple hundred dollars a month in an investing account. After a few months, you look and you can see how much bigger the account is.”
Founder of The Vanguard Group John Bogle has an investment strategy to use index funds, and start buying stocks as early in life as possible.
Many people have found success following the creator of the index fund’s advice. In the last chapter of his book The Little Book of Common Sense Investing, Mr. Bogle wrote, “We know that we must start to invest at the earliest possible moment, and continue to put money away regularly from then on.”
The earlier one starts investing, the longer they have to take advantage of compound returns. This investment calculator can illustrate the difference extra investing years can make.