Have financial goals you want to save for? Think: starting a business, buying a house…or going on that dream vacation. Female millennials have financial goals, but we may not know how to reach them. We’re here to help.
If you want a chance at becoming wealthy, you need to do more than simply earn money and save money. Most importantly, you need to grow your money. And in order to grow your money, you need to learn how to invest.
Investing can seem scary and complicated. But thanks to advances in technology, it doesn’t have to be. In fact, you can be a complete novice and start to invest with as little as $5 a month and a smartphone.
Plus, thanks to our friends at Ellevest, when you invest today, you receive $100 towards your first funded goal.
That’s free money to you. So, why haven’t you started already?
There may be lots of reasons, but, you’re here now. It’s our job to help you learn the basics, and make good investment decisions from the start. So let’s get into it.
So here are the basics of how to start investing—wisely.
Investing allows you to significantly grow your money over time thanks to the power of compound returns. What’s compounding, you ask?
Compounding can be called the Eight Wonder of the World.
Thanks to the power of compounding, a single penny could grow into millions of dollars, given enough time. These “returns” are what they sound like — the money that comes back to you from market gains or losses. Leaving in place gives you the opportunity for compounding: earning money on top of the money you earn. Consider the following example:
Here are the numbers
Say you start investing $100 today and earn 10% on it in the coming year; that’s $10, which means you then have $110. If you earn that same 10% return the next year, you earn it on the $110. So you earn $11, not $10. Do it again, and the same 10% return earns you $12. And so on and so on.
And over time, it adds up to a lot. Like a lot-lot. And well outstrips any benefit of “waiting to invest.”
While there are many factors to consider—a simple example like this demonstrates the power of compound interest.
Give it a chance to grow. Your move. Get started here.*
Investing vs. Saving: What’s the difference?
Investing: 10% is the average annual return the stock markets have produced since 1926. This includes the lowest lows: The Great Depression, the massive slide after September 11th and the financial crisis of 2008.
Saving: …and the average interest rate on most savings accounts is actually below 1% — about 0.06%.
People tend to think of saving as the “safer” route, but it’s not that simple.
Start investing to grow your money. Get started here.*
Let’s look at the numbers:
Say you’ve got $5,000, and you plan to use the money in 30 years
So, first what happens if you keep it in a savings account, where it’s “safe”?
Let’s be very generous and say the bank offers an interest rate of 1%. You keep your $5,000 there for 30 years.
You net out with $6,739.
Sounds great, but with an average inflation rate in 2017 around 2.5% or higher, you actually lose purchasing power.
So, what happens if you put that $5,00 in a highly diversified portfolio of low-cost ETFs (aka an investment account)?
Over the same 30 years, in the majority of market scenarios, it can grow to $27,054 or more.
Now we’re talking.
P.S. Our friends at Ellevest have got your back to help you save for the future and they’re giving you $100 to start. Learn more here.
There are five essential things to know about investing. Sallie Krawcheck and Ellevest take you through each and give “real world” examples for investing IRL.
5 Rules to Invest By
Make it a Habit: Don’t think you have enough money to invest? Start small and make it a habit, just a little out of every paycheck. Then when you get that raise, you can increase the amount. Here’s the smart way to break down your monthly income with the 50/30/20 rule — so you don’t keep waiting. That means 50% of your take-home pay goes to needs like your rent, groceries, the clothes you wear to work; 30% to fun (because you have to have fun); and 20% to Grandma You.
Now, if you can’t make 20% happen right away, that’s okay. Starting slowly with investing is fine. It’s all about making it a habit. Try investing 1% if that’s all you can, or 5% now and then increase it in the future when you get that raise.
Diversify: Diversity always makes for better teams, and when you’re investing, it makes for better portfolios too. Typically the sweet spot is a low-cost, well-diversified investment portfolio. Because, well, you don’t want all your eggs in one basket.
Keep Costs Low: Watch out for fees. When you start investing with a broker-dealer or an investment advisor, they will most likely charge a fee for their service. And there may be other hidden fees tacked on to what you buy, so don’t be afraid to ask how much you’ll be charged.
What’s a low fee? At Ellevest, they believe you shouldn’t pay more than 0.20% overall for the funds in your portfolio. Digital platforms such as Ellevest keep costs low by offering managed assets at an affordable rate.
Look for a Fiduciary: There are a number of “advisors” out there. Learn the difference. That way you can make the most informed choice. At Ellevest, they are fiduciaries first, which means that they must act in your best interest at all times. You should ask any investment providers you use or are considering, whether they are a fiduciary and where they stand on this issue.
Balance Risk & Time: Learn how to make smart decisions about risk for different kinds of financial goals and how to think about that risk over time. When you’re young, you may be able to afford being more aggressive with your retirement portfolio because if something goes wrong with the markets, you may have time to make up for losses before you retire. You can get more conservative as you go.
Investing can be a great way to make some money. Do your research. And choose what’s right for you.