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 Market Mysteries of the week

   How do I know when it's the right time to invest? 

Answer:

You will never know if it's better to buy an investment today or tomorrow, so the most important thing is to get started.

Time in the market is much more important than timing the market.

Open an account. Start small. Stay diversified. Keep a long-term mindset.

How do I know I'm ready to start investing?

Investing in the stock market is for everyone. But it might not be the right time for everyone.

You need to have your basic financial health in order to be able to start growing your wealth. There are a few key steps the typical Scoop investor needs to take before starting to invest.

Pay off all of their high-interest debt.

That means things like credit cards, where the interest rate is double-digit. We don't have to be debt-free to invest. Investing alongside student loans or mortgages with low-interest rates is okay, as long as you're making the payments. The deciding factor is the interest rate.

Debt is essentially investing in reverse.

Credit cards eat away at your wealth at +20% annually. The stock market has historically grown by 8-10% annually. So you can't really outgrow that negative draw.

Have enough cash set aside for emergencies,

like losing your job or unexpected medical expenses. There's no perfect rule for how much to stash away, but many people consider saving six months of income or expenses.

Never invest money that you'll need in the next 3-5 years.

Investing takes time. Companies don't grow overnight. The market crashes. You have to be prepared to watch your money lose value in the short term to have a chance to watch it grow over the long term. You will watch it lose value at times. Be prepared for it.

Should I be doing this in a retirement account or something else?

Most people think about doing a mix.

Investing for retirement is great, and retirement account investments can grow more quickly because they're excused from some taxes. But your money is locked away until you're almost 60. You'll likely want to have some money saved and growing for significant expenses, like paying for a home, car, renovations, or education.

Always check if your employer matches your retirement account contributions.

Many employers will add $X to your account for every $X you contribute. That's free money. There's no other way to double your money immediately for free without additional risk.

How do I know what to invest in?

Investing starts with an opinion.

You can pick a particular company you want to put your money behind or select an industry or a whole economy.

The best place to start is with your broadest opinion.

Do you think the whole economy will continue to grow and prosper? If not, why invest in it? Do you think a particular industry will be more successful than the rest, or a particular company?

The typical Scoop investor starts by investing in the whole economy, buying every company so that as the economy grows, our wealth grows with it. For most Scoop investors, repeatedly purchasing a single fund that spreads their money across the whole economy is all they ever need. If you find a company you want to own more of, you can always add that in later.

Either way, it's essential to understand what you're trying to invest in. Different mutual funds, index funds, ETFs, etc., are all just different packaging of companies. Vanguard, Fidelity, iShares, etc., are all just different branding. You don't head to the supermarket without intention. You also don't start by saying I want a General Mills product. You say, "I need some graham crackers," then decide what to buy based on the brand's price and quality.

Can I invest in the same stuff everywhere?

Pretty much.

"Brokerage" or "self-directed" accounts are like the supermarket. The same options are available at most stores, aka investment platforms. Figure out what you want, go to the aisle, and pick a brand. If you're going to invest in US companies, you might look up US Total Market and select a trusted brand you've heard of, like Vanguard, Fidelity, or iShares. Make sure it has billions of other people's money in it (Assets Under Management), and the fees (expense ratios) are low (less than 1%). In a brokerage account, you can also choose individual companies.

Retirement accounts typically have a restricted menu.

Your employer partners with one provider and allows you to choose from their branded packages for US companies, international companies, tech companies, etc.

If I haven't started, is it better to invest a large amount at once or a small amount on a recurring schedule?

The amount you invest is personal.

It should depend on establishing an emergency savings, your bills, and the fact that this money should be considered locked up (even if it isn't technically) for several years. After you figure out how much you should be regularly stashing away for the long term,

the rest of the decision is a question of market timing.

You will never know the right time to invest, and the best times to invest often feel like the worst

. So the only reason you would wait to invest $1,000 every ten weeks instead of $100 each week for ten weeks would be because you think you'll time it better. Spreading out your investments is called Dollar Cost Averaging. The most important thing is just getting invested.

Investing in big lumps can more often fall victim to procrastination.

If you'd like more control, consider only setting up some of your allocated investment funds to a recurring schedule. That way, you can ensure you're still investing while also having cash on the side to invest opportunistically.

At the end of the day, the money you invest today versus a month from now will not look all that much different in 10-20 years.

The best thing you can do for your investment process is to take the emotion out of it.

If you need a recommendation for a good investment platform, our favorite is

M1 Finance

. We've tried a lot of accounts. We like M1 because they make it really easy to set an allocation you like - maybe 95% of a diversified fund and 5% into specific companies you like - then auto-transfer and auto-invest without having to worry about the trading process. Trying to do the math on share quantities is a pain. We've been reviewing dozens of platforms and will have more recommendations across all your financial needs launching soon. We're always available for questions.

Feel free to share this with anyone who might find it helpful.

💙 The Share Scoops Team

💙 The Share Scoops Team

P.S. For a limited time, we're including our whole mailing list in our Market Mysteries Explained weekly email as a thank-you to our earliest supporters. As we grow closer to launching our beta platform, you'll be the first to gain access. We can't wait to show you!

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