Originally posted on Money with Merne’s Facebook Page on May 25, 2017:
If you’re struggling to get out of debt and build up savings, you’re not really thinking about investments outside of a retirement fund, but I hope you will get there soon! So, while this may be more advanced for some of you, I wanted to share my current investment strategy and how it came about:
Back in 2008 when the market crashed and I had just moved back in with my parents, I had the perfect opportunity to get my feet wet in individual stock investments with very little risk (low stock prices with nowhere to go but up and extra cash to burn). I spent a lot of time buying and selling with small amounts of money (we’re talking just a few hundred dollars here and there) and LEARNING. I started liking dividend stocks. Companies that paid me money on a quarterly basis just for owning shares, no matter what the stock price was. So I bought and held a bunch of dividend stocks that I still have today. The great thing is that those dividends get automatically reinvested in the stock so I just increase the amount of shares I own, which increases my quarterly dividend and the cycle continues on quarter after quarter, year after year! Plus, the stock price has gone up too!
While I think individual stocks are a great way to learn because you can be more excited about owning companies you know and understand, it’s really hard to be diversified when you’re in a few random companies. Plus, it’s very unlikely you’ll find a company, or even a mutual fund, that can outperform the overall market. Enter index funds, my current investment strategy. It’s a fund that models an entire market, the most popular being the S&P 500. Instant diversification and the best returns over the long run. No willy nilly buying and selling to make a quick profit here!
Investing is about time. So each month I put money toward the index fund whether prices are high or low. They will balance out, and I will get the best return over time. Investing does not have to be crazy complicated!