How can a self-employed single mother begin investing with $100 to $700?
I am a self-employed single mother with six children. I am interested in beginning investing. Is it smart to invest with limited income, or is investing only recommended for people who are affluent? I can invest $100 to $700. Where should I start?
If you do choose to start investing with a small amount, my #1 piece of advice is to find an arrangement where you can buy stocks without commission. On a modest initial investment such as what you are suggesting, even a $4.95 commission (what Schwab and Fidelity current charge for a stock trade) on a $100 investment puts you 5% in the hole on your investment before you even can get off the ground. Terrible. The only way it would make any sense for you to invest is if you could get free stock trading (zero commissions). Take a look at Robinhood, which has a decent free stock trading offering.
When thinking about what to invest in, either buy stock in companies you know and understand or go with an index fund that is highly diversified, such as a Vanguard total market fund like ticker VTI.
If you have any debt, it is probably best to pay down debt before investing, since the guaranteed return from paying down your debt is probably better and safer than taking the risk of buying stock while you have loans hanging over your head.
Approaching your question from a financial planning perspective, there are several factors to consider. The first thing we suggest to clients is to understand your expenses and to create a budget. Once you know your budget, we recommend having 3-6 months of expenses saved in cash or savings as an emergency fund. Think of this emergency fund as a hedge against the unknown that you cannot afford to lose, and will be happy you have in case of a job loss or medical emergency.
Once you have this emergency fund, and are looking to invest ona limited budget, there are many great websites and apps that allow for inexpensive investing. E-trade is a notable example of a site that will allow a certain number of free trades. I would recommend taking a risk tolerance quetionaire in order to determine your level of comfort, and investing in low cost ETFs based on the outcome. Another great option is the App Acorns. This program will allow you to round up purchases and invest the difference (example: buy a coke for $1.25, 75cents is invested). You can also choose to invest weekly amount automatically.
Investing is certainly no longer for the wealthy, and every little bit counts!
One comment first. People become affluent because they save; they don't necessarily save if they are affluent. I salute your willingness to start saving for the future at a time when you clearly have plenty on your plate, financially.
I always recommend that people "pay themselves" when they sit down to pay the monthly bills. Open a brokerage account at any discount broker, fund it with $100 or $700 or whatever, and buy a good index fund. We usually put an equal-weight S&P index fund into little accounts (symbol RSP) but do your research and pick what's right for you. Then, put something away every month and you'll be surprised and delighted at how it grows.
Just remember that stocks can decline in value too. This is perfectly normal and nothing to worry about. It just means that you can buy more shares with the same money next month. And for heaven's sake, never sell your stocks when they are down.
First of all, great job living within your means so you have extra monthly money to invest. Step one is to make sure you have at least 3 months' of living expenses set aside in a savings account. That will provide a cushion if your income is less than expected.
Next, you can consider a self-employed retirement account. This allows you to put money aside and deduct the savings from your taxes. The investments can generally start small in these account. If you are a solo business owner with no employees a SEP IRA or Self Employed 401(k) are cost effective retirement accounts that you can open.
Another option is just a regular Individual Retirement Account (IRA) or Roth IRA. These accounts also give you tax benefits for investing.
A chart that I like to compare the different small business retirement account options is on Fidelity.com. Here is the link. https://www.fidelity.com/retirement-ira/small-business/compare-plans
Hope that helps!
Dear Self Employed Single Super Mom of Six Children,
You said "I am interested to begin investing". That is the single most important start- intention!!!
I applaud you, six children of your own, raising them on your own, you are in a unique situation to succeed.
You do not need to be affluent or be overly qualified or educated in the subject of investing, willingness is key!
If you dedicate yourself starting now to a plan, stick to the plan in automated fashion you will surprise yourself.
The amount you will eventually accumulate starting now with from $100 to $700 (either per month or ....)
"it will all depend" on the consistency of automation of monthly payments to the fund, on your time horizon,
your goals, whether they involve taking money out for school expenses, medical, on your tolerance for risk.
There is an amazing web site www.personalcapital.com. Look at projections, map out the course over time.
Get help early if this causes you to question the steps involved to create a budget, plan and execute.
Before you learn to invest in the markets, which has lasting and long term consequences, make certain you
start with a money consciousness, make certain you are aware of and are learned in what you are doing, the
art of investing must transcend all you will do. To acquire such a conscienceness, start listening to podcasts
from top financial professionals and women entrepreneurs who speak to empowering a money consciousness
and who are themselves working toward financial independence.
This is a truly a multiple step process which involves acknowledging the need to invest, the ah ha moment,
acknowledge your determination while others around you are spending, in some ways the process is not fun
nor attractive like buying a new purse or outfit, the process is actually hard walking away from yet another
latte. Get ready to learn all there is to learn about money, savings strategies, read books, periodicals, scope
out every young millennial on line making the decision to create financial independence. Take a good look at
yourself, gain critical insight about yourself, your family and how money was cared for growing up.
When you read about investing, learn investment styles (value, growth, speculative, short term, long term).
Learn about individuals who invest and how they profited during their tenure as investors in the stock market,
real estate market and bond markets. Seek to learn that the individual and how they control their money, their
emotion and investment style will affect the long term success of their portfolios. Learn from the great of the
greats, Market Wizards, Warren Buffett, George Soros including business moguls Steve Jobs, Oprah Winfrey
and Karl Icon. Tesla did not just become a great company nor did Apple. It took dedication, determination and
mind set to lead the way to greatness. Then it took dedicated action, fearlessness and focused follow through.
Again, seek to understand Investment strategies, savings strategies, trading mentality. Be humble, patient and
focus on the long term for the sake of you and for your children. This is a life commitment to grow savvy and
smart long term. I call it the "tunnel vision approach. Do not allow someone to convince you into an investment
strategy prior to you being fully aware and on board, meaning you must totally understand what you are doing.
Platforms available to you are diverse including among the many (not in order of importance or worth) E-Trade,
Interactive Brokers, Fidelity, Morgan Stanley, Sink or Swim. There are many professing to teach and mentor
money consciousness, women motivators themselves achieving financial independence. In the end and at the
end of the day the proof is in the pudding- you control your own outcome. Because i have seen challenged
individuals achieve financial greatness I will open the door and empower you to seek your own greatness!
I run small groups for millennials, college students and eager investors to empower a mindset of saving and
automation of their finances. I and passionate to empower all to reach for and to attain financial independence,
I acknowledge anything is possible. We provide a dynamic forum to make it happen. You provide your own
creativity, inspiration, self motivation, determination and your own roadmap to the finish line whatever that is.
I teach basic strategies, how to watch and understand the market, setting up a dummy account, moving
forward knowing your own risk tolerance and how to successfully navigate the market whether you are willing
to have no risk, medium risk or higher risk tolerance within a portfolio.
My goal- initially and for the long term, I mentor caution, I mentor care, diligence to instill empowered action
long term. It is exceptional for you to start now. If you begin with the 100 per month or as much as 700 per
month as you intend and never allow anything to stand in your way, the power of compounding over time will
allow you to amass a great fortune to place you in a position of attaining financial independence.
Stay on track. Stay focused. Be totally clear about your course of action.
I am here if you need an advisor and financial mentor.
Jan Attard, MBA, RIA
J. Oliver Maxwell, LLC
tele. # 925-876-1377