01/11/2019
Investing tip number 1 - and this one is THE MOST IMPORTANT. Not only is it the most important, MY REASON for it is what makes it so important. You probably have heard it before, but no matter what you are investing in, do not invest more than you are willing to lose!
I know, I know- "Danny everyone always says that who cares." Don't take this the wrong way, but I am not saying this because I care about your money. While I do care about that, I am saying this because I care more about your MENTAL HEALTH. I interact with investors all the time whether it is in my trading group, answering questions from YouTube comments, twitter posts, articles I write, etc. and the biggest problem I see is that people are far too stressed out about their investments. Investing should be FUN! However, people get over extended and they think about it all the time. "Oh no, the market moved down a little bit I'm losing money maybe I need to take my money out" is something I hear too often, and is a quick path to failure. If you invest the proper amount, the mental stress of investing goes away. This mental stress people have is the BIGGEST barrier to entry to investing- FEAR drives people away, and a mission of mine is to help stop that.
So, how do you know how much you are willing to lose? What is the right amount? Is it 5% of my salary? 10%? $50 a month? The answer? None of the above. Finding the right amount to invest in anything is an personalized endeavor, but here is a simple way to calculate that:
1. Write down how much you make per month
- if you get paid every 2 weeks, multiply your check by 26 then divide it by 12
- if you get paid twice a month, multiply your check by 2
- if you get paid every week, multiply it by 52 then divide by 12
2. Write down ALL of your expenses
- yes, ALL of them
- yes, Netflix and Hulu count
- overestimate your grocery and food bills (people
usually underestimate that)
3. Take a look at how much money you have left over, and work off that number using these principles:
- if it is less than $250, do not invest more than $50 per month.
- if it is between $250 and $1000, invest between $50 and $200, at your comfort level
- if it is over $1000, flat rate investing works for you. Pick a percentage between 15% and 25%, at your comfort level
Using that strategy with those levels above, you will both force yourself to invest in your future, and do it in a stress free manner. Investing doesn't have to be some gigantic, daunting task that takes immense amounts of money. Investing as little as $25 per month will add up over 20 years with growth!
I hope this helps you all out. If you have questions about any of this just shoot me a message, I'll be happy to help!
-Danny
