A friend of mine at the gym would always play Bloomberg on the sole television in the room. I asked if he was an investor or maybe a day trader and he replied that he just found it fascinating. He wished he had money to put in the market but he was barely scraping by he explained.

I would scoff at his interest and think to myself if he doesn’t make enough money to invest why is he so interested in the financial markets. I found myself watching and gaining interest but still did not know a lot about how to invest and left it up to those that did.

Sure I had a 401(k) and a 457, but they were both on autopilot. Target funds, moderate risk, that was about the extent of what I understood. If I was going to want to retire in 2035 then the target 35 fund was the right one to invest in. Besides, I did not have that much money invested so why even worry about the market at this point.

Small Inheritance

A month into 2020 I started thinking about my debt. I had inherited a bit of money from the loss of my father and knew I wanted to pay off some of our debt with it. I did not want to use all of it, but just enough to kick start the avalanche.

After talking with a new friend that opened my eyes to a life I never knew could exist for me, I began to rethink my strategy. When the pandemic hit I decided that it was time to act and attack my debt.

A few months later and a few thousand dollars into my debt journey I decided to put a bit of money into investing. I had been reading some blogs and personal finance stories and everyone had some sort of investment account.

Easy Investing Apps

I did some research. I looked into Acorns, Betterment, Robinhood. These all seemed easy enough, but after reading some reviews and digging into the blogs more I focused back on the larger firms, Vanguard, Fidelity, and Schwab.

When my father died he had a small amount in a Fidelity 401(k). In order to expedite the funds, my brother asked us to open an account there if we did not have one already. So I opened an account. We learned later that this was not necessary and the funds came by check. The inheritance was a modest amount but enough to give me a psychological boost.

With Fidelity, I had opened a traditional IRA, but I wanted an investment account. I already had an account with Ally and the morning that I decided to invest I received an email talking about their offerings. That afternoon I opened my first individual investment account with $500. However, I made a mistake. I opened a managed account.

Wanting to self-invest I emailed their support and asked what I needed to do to close the account and open a self-directed investment account. After some back and forth I decided to keep the managed account and open another individual account and purchase my first share.

My First Stock Purchase

This time I began with $100. I wanted to purchase $VTSAX, Vanguard Total Stock Market Fund since all the personal finance bloggers wrote about how great this fund was. I did not realize that this was a mutual fund and had a minimum purchase amount of $3000. Back to more research and settled on $VTI, an Exchange-traded Fund (EFT).

Stocks, mutual funds, ETFs, Index funds, dividends; I had no idea what any of this meant. I just knew that these funds bought smaller shares into the larger market. Both $VTI and $VTSAX own shares in larger corporations such as Apple, Microsoft, Amazon, and Alphabet. It allows you to own shares without having to purchase individual stock. It also has experts that reevaluate their positions in the market if things start to decline too rapidly.

Sure, ETFs can go down far enough for you to lose money, but the year over year average of the larger ETFs was promising. I realized at that time that I had only $100 and the price for $VTI was $157. Adding another $400 to the account, I bought a few shares and then decided to see what other ETFs I should buy.

Buying Exchange-trading Funds (ETFs)

Turning to Google I searched on high-performing ETFs for 2020 and decided to try some that were investing in sustainable firms. I looked at some additional dividend ETFs and settled on iShares Core Dividend Growth ETF $DGRO, and Vanguard Total International Stock Index, $VXUS. My first venture with a more sustainable ETF ended in a bit of a loss, so I moved on and stayed the course with these.

A few months into the pandemic and I encouraged my daughter to use her money from her paycheck to invest as well. She was sitting on $4500, while still living at home and having no real expenses. I told her I would help her open an account and invest in a similar fashion. She would maintain total control but I would monitor the account.

This time we invested in $BNDX, $VTI, and $VXUS. Between the two of us, we are now sitting on an 8% rate of return for the six months we have been invested. My one account is actually over eleven percent in the past three months.

With the market at an all-time high, it feels good to have money invested.

How do you begin, when you know absolutely nothing?

Research.

Let’s start with some of the simple concepts.

What is a Mutual Fund?

A mutual fund is essentially a way for a lot of investors to pool their money together to purchase larger stocks. You purchase shares of a mutual fund and the fund managers purchase a percentage of the stock. It is a quick and easy way to enter the market.

Mutual funds can have limits to investing and some can carry fees. For instance, $VTSAX has a minimum buy-in of $3000. Once you invest the initial $3000, however, you can contribute additional funds in $1 increments. Depending on the type of account there are also service fees. If you use Fidelity and buy $VTSAX you may pay an annual account service fee.

What is the Difference Between Mutual Funds and Exchange-traded Funds?

The biggest difference between the two is that ETFs’ values fluctuate throughout the day. A mutual fund only trades once a day after the market closes. Tracking the value of an ETF can show fluctuations as the stocks are bought and sold.

Fees also vary a bit with ETFs. VTI is currently charging four percent for fees. Most investment firms do not charge a commission for trading ETFs which differs from trading stocks in some instances.

How Do I Start Earning Dividends?

To start, what is a dividend? A dividend is a portion of the profits that a company earns paid to its shareholders. The shareholders in this instance being anyone that owns stock in the company.

If you purchase a stock that has a dividend you will be paid, usually on a quarterly basis. Unfortunately, since you only own a portion of the stock in the dividend the percentage paid is based on the percentage owned. My last dividend payment for the third quarter was just over $11 on a $3500 investment. Not quite a fortune but the goal is to keep investing the dividend and grow that amount each quarter.

Make sure you reinvest your dividends. Many sites require you to set this up when you manage your account. Usually, it is just a check box.

You Need Money to Invest

Yes, you do, but not as much as you think. Many apps allow you to start with minimal amounts. Acorns and Robinhood are both considered micro-investing since they allow you to start with basically spare change, however I would recommend using a more traditional investment firm such as Vanguard or Fidelity. Learning a bit more about how to invest will help you understand the markets.

I started with $100 back in April and now have over $3700 in my individual investment accounts. You may also want to start with a Roth or Traditional IRA as these offer tax-deferred investing for retirement. I already had my investment accounts, however, I did open a Roth IRA to diversify.

What About Real Estate Investment Trusts?

When doing research you hear stories of investors that make a lot of money on real estate. REITs, or real estate investment trusts, are companies that own or finance real estate across different property sectors, such as offices, apartment buildings, and retail centers.

An investor is paid on the profits of the investment. REITs historically have high rates of return, however, the pandemic may have affected some of these returns. Retail especially has been hit hard, however, the lessons learned in the last recession has helped these companies sustain some of the downturns.

When the pandemic finally ends having REITs in your portfolio could help you diversify.

How Do I Understand What Effects the Market

You don’t, unless that is your job.

Market fluctuations may seem like they have no basis in reality. In the middle of a pandemic, with a contested election, and a divided America we see the Dow Jones Industrial Index grow to over 30,000 points.

What does the Dow even represent? The Dow is made up of 30 of the largest publicly traded companies. Companies such as Nike, Home Depot, Walmart, and McDonald’s are used in the index.

It is a representation of most of the market sectors such as oil and gas, communication companies, healthcare, and tech firms. Companies are listed and delisted over time as it is supposed to represent a broad range and diverse sector of the larger companies.

The Dow is influenced by quite a bit of economic news. The initial lockdowns caused a large drop since we saw unprecedented unemployment. As consumer confidence and economic news showed more promise the numbers returned. Recently the news of vaccine development and the election results have caused the market to rise once again.

Trying to predict the market is not an easy game and typically one you should not even worry about. As the saying goes, “time in the market is better than timing the market.” This is not to say that if you are close to retirement you may not want to add too much risk to your portfolio, but if you are a novice you should not have a lot of risks. That is the appeal of ETFs and Mutual Funds. Let the experts try to figure out what news will affect the market.

Investing is not difficult if you spend a bit of time doing some research. You do not have to be a millionaire to make money in the market. Start with a modest amount and watch as it earns you more. Even $100 is enough to begin the journey.