How do you recognize when you are ready to start investing?
I am curious what your thoughts are on investing at 23 years old with only a couple hundred dollars to play with right now. I have roughly $200-$250 that I want to start using to invest in order to grow the money. Am I better off waiting until I have more to play with? If so, how much is a good number to start investing? Should I proceed forward and start investing money into companies for short-term gains so I'm able to put said gains into more long-term investments?
From the standpoint of preparing for the future, you're certainly thinking the right way. The sooner you begin, the better off you will be. Although many folks wait until the years before retirement, it's much more helpful to get going now and take the long view. With that said, however, you would be well advised to consider making regular contributions, however small, to a broadly diversified investment vehicle rather than what amounts to the highly risky practice of buying a few stocks and keeping your fingers crossed. May I suggest a combination of two exchange-traded funds: VTI, Vanguard Total U.S. Stock Market ETF, and VXUS, Vanguard Total International Stock Market ETF. They are about $125 and $52, respectively, so you could buy 1 share of VTI and 2 shares of VXUS to get started. The trades can be done through online brokerage houses (Schwab, TD Ameritrade, etc.) for $5-7 each. As funds are available, you can add to these holdings.
It's never too early to begin building financial habits. Millennials, more so than anyother generation must take control of their financial future, early and often. Before beginning to invest, I suggest checking out some books focused on young investors. The Millennial Advantage is a good start : ).
I'm uncomfortable with your language around investing and therefore feel you may not be quite ready to be an investor. You don't "play" with a couple of hundred dollars. It's not a horse race and you aren't gambling, or at least that's not my view of the best way to make money in the market.
First, I suggest that you make sure you have cash in the bank to cover emergencies.Without cash in the bank -- which admittedly earns nothing -- you are at risk of slipping into credit card debt should something happen that you're not prepared for. Credit card interest rates are generally 15%+. That could cost you a lot more than what you'd like to invest in stocks at this time.
I sincerely hope that you will read up on investing while you save a little more money and look into investing in an S&P 500 fund as your first foray into the market. It would give you broad exposure and dividends that you could hold for a long time given how young you are.
I'm sorry to sound like a fuddy duddy. I think good money habits learned early go a long way to building wealth. You are smart to be thinking about growing your money in your twenties. I want you to be successful!
There is no better time to start investing than today. When I was 22 my friend set me down and helped me set up my first investment account with a whopping $25 per month. Invested in a single mutual fund and watched at my account grew. The important thing was to get started.
Pick a mutual fund, and set up automatic contributions on a monthly basis. Getting started is more important than picking the "best" investment. That being said avoid the trap of trying get rich quick with short term gains.
DAVID RAE, CFP®, AIF® is a Los Angeles-based retirement planner with DRM Wealth Management. He has been helping people reach their financial goals for over a decade. Follow him on Facebook, or via his website www.davidraefp.com. Los Angeles Retirement Advisor Blog
This is a great question and in short, the earlier the better and start with what you can. I believe you are ready to start and it is evidenced merely by the fact that you are asking this question.
We have clients that are of similair age investing $50 per week in order to get started building their wealth. I would certainly guide you to look to work with a fiduciary. You can learn more about this by reading Tony Robbins book Master The Money Game.
Start building good habit today and they will pay dividends for you in the future. Get started today!