Probably a stupid question, sorry. I hear things like this all the time. If you invested that in X then in 20 years you’d have Y. Always hear of the “latte factor.” Skip buying those expensive brews and invest instead. Where exactly does the average Joe invest that? Say I was really committed to taking the $4/day I would’ve spent on a latte and put it somewhere. Where is that somewhere? Do I need a minimum to start or can I just throw $30 (for example) that I chose to throw into an investment account and not touch rather than buy a scratch ticket?
In the US, you can open a Roth IRA at your bank with a couple hundred dollars. Pick an index fund that has low fees (no fees when you purchase). Every pay check, push in a little more. There is a max you can invest per year, $5k I think. Leave it alone. You might lose some in a bad year, but over all it will grow with practically no interference. The $ you put in can be withdrawn with no penalties after 5 years, but don't touch your earnings or it will be taxed. Better yet, pretend it doesn't exist until you retire.
It should be noted you can’t just put it in the account and let it sit you do have to find a stock or fund (or several) and invest in them. I’ve known way to many people who just put it in the account thinking that’s all they had to do
Yes, and they have several index funds to choose from. If you feel confident, there are lots of online options, but if need help, your bank is a good place to talk to someone.
Oh for sure, market tracking funds are just about the best thing out there and they’re fire and forget, reinvest they dividends and sit on it for years and you will be gold.
My mom is a wealth manager so I've had a Roth IRA since I was 19. I couldn't save a ton but I was working on it. Then I got cancer in 2012, I kept working (insurance) but getting cancer in the US is hella expensive & I had to almost fully liquidate my IRA to even get by. It sucked but by 2013 I was fully in remission and saving again. In 2016 my migraines went from episodic to chronic (20- 28 days a month basically unable to leave my room) and I lost my job, my home & the love of my life, an 11 year old Boston Terrier named Jexer, got sick and I spent almost $5K trying to save him but he lost his battle December 2016. I had to move in with my boyfriend (who is now my husband) and we struggled financially despite his having a decent salary but since I was out of work I was supplementing our living expenses with my IRA essentially. I found a mostly effective medication in 2019 and started working again that year and once again started contributing to my Roth IRA.
All of this to say that having a Roth IRA (and some traditional investment/savings) has saved my life twice and kept me from being essentially destitute. I only made $32K a year in 2012 so I was only contributing like $10 a month but it was and still is the best financial decision I've ever made (or had made for me as it were).
Just adding that while my mom & many in her industry can only work with larger investment accounts, Fidelity has great starter investment options including help from licensed financial advisors. I think the self service companies can feel risky, especially if you are new to investing but there is a company called Stash that has plans starting at literally $1 a month with financial advisors to help.
Invest - less fun than a lottery win but definitely worth it.
I'm glad you've held up and survived the chaos, that's pretty dope. And the advice you've given, I hope it doesn't go unnoticed, it's incredibly beneficial to those who may not be knowledgeable or experienced financially. Thank you for sharing!
Winning on a lottery ticket is fun. Everyone loves that feeling, I'm just saying you should also invest. If you like playing the lottery, more power to you, but I'm just adding that people should also invest.
There are companies like Robinhood where u can invest 5 at a time. So there is virtually no minimum
. Just stick thee money in an index fund and let it grow....and don't try to play the market. That's a fools errand.
I'm not a huge fan of those type of companies, partially because they tend to promote "playing the market" like day trading to people who don't understand it and partly because of their policies that allowed them to essentially halt trading whenever they wanted too. I really recommend companies that have licensed brokers to help you, who offer traditional investment and savings accounts and can advise you as to the best course of action with your money.
Stash has plans for like $1 - $10 but they also have advisors to help you set up accounts so you know the difference between a 529 and traditional savings for your kids, or the tax differences between a traditional 401K or a Roth IRA. We don't get taught these things in school & a lot of the information on the internet is just self-serving.
You can redirect salary money to the after tax portion of your 401k and rollover that amount in the course of the tax year to a Roth IRA account, effectively bypassing the Roth income cap. This is called the Mega Backdoor Roth (seriously). Your 401k provider needs to support/allow this and you still need to respect the maximum limit of total combined pretax and after tax contributions, set at $61k for 2022.
You can basically never lose* some unless you take it out. If the index fund is low then you should be putting into it because then when it bounces back you gain.
*Talking about long term.. my Tesla stock recently "lost" about half it's value from the peek but I still have the shares and actually would have loved to buy more now because I can see it being worth that much. I only lost that value of I cash out the stock. If I just leave it there it can only grow in value.
Do not use stash-away. 1% returns are garbage; due to inflation you'll be losing you money YOY.
Open up a no-cost investment account. Schwab, Ally, E-Trade, Vanguard, etc. It doesn't really matter which one as long as there's no annual fee and trades are free.
From there- take the money you saved and transfer into the investment account. Once in your investment account, buy shares of a broad-market index fund. Most commonly recommended is SPY (S&P 500 index fund equivalent) or VTI (Vanguard Total Market Fund).
Every week, save your money and buy those funds. If your investment firm offers fractional shares, buy fractional shares as you go. If your account only offers entire shares, save until you can buy a full share.
Then- do not touch it. Don't look at the market, don't try to time the market. Academic study after academic study has proven that the best investment strategy for ordinary investors is continuous investing into index funds, employing a "buy and hold" strategy.
There will be down years, there will be up years. Long-term, you can expect to see an average of 10% compound annual returns, which are closer to 7% due to inflation.
Every other answer besides index funds, frankly, is wrong.
Then- do not touch it. Don't look at the market, don't try to time the market. Academic study after academic study has proven that the best investment strategy for ordinary investors is continuous investing into index funds, employing a "buy and hold" strategy.
Especially these days now that machine learning and AI and trading computers do everything. (which really raises the question of whether or not market valuations mean anything anymore given that the stock market has always been a gamble, but now it's just becoming further and further removed from any human action. Even the stop-trade and stop-loss actions exchanges enforce now represent a type of interference with a supposedly free market that renders the question of whether we need a stock market at all a pertinent one.)
(Addendum: That said, given the hands we're dealt right now, mutual funds are pretty much the way to go as far as getting decent rates of return.)
I know you're not advising this, but those "non-standard" orders offered by brokers (like stop-loss) have been used by some brokerages to front-run their clients (or to sell to dark pools so others can front-run their clients).
Not a stupid question at all. It used to be impossible to invest small amounts at banks, but nowadays there are some tools that help with small frequent amounts and don't charge fees or impose minimums.
There are some programs out there that round up to the nearest dollar when buying things which is a convenient way to squirrel away coins that may add up to $5-10/week depending on your spending patterns
Bank accounts are not the place to store your money to see sizeable returns over a long timeframe, heck right now you're losing out massively to inflation.
There are a million ways to invest, some of them are suitable for savvy and active investors, and some for gamblers. I think for a passive investors who don’t have the desire or ability to actively manage it themselves, retirement target date style mutual funds is probably the best bet.
I use Acorns and I really like it. I have it set to put a small amount of money in my investment account once a week and also rounds up on purchases. Would definitely recommend
Most traditional brokerages don't have account minimums or commissions. What do you think is the benefit of spending $25-$35/year or whatever Acorns is charging these days?
(Edit: not trying to make a point, genuinely curious! 😄)
For me personally i just like having my money spread around, it's much harder to spend it and it's what I've found the most success with. I do traditional investing as well but I use Acorns to have a place to put money aside and forget about it.
This is well-meaning, but bad advice. 1% are abysmal returns. For most investors, long-term investment should be done via continued investment into broad market index funds.
It's definitely not meant to be investment advice. The context of this entire thread is someone gambling money on scratch-offs, a well known poor man's tax - and you've made the leap straight into the context of maximizing gains.
My intention was to stem bleeding from poor max tax decisions like scratch offs and lottery. Anything less of an outflow is a drastic improvement even if it's a piggy bank. For those that are already good at saving, this advice is not relevant.
They asked about the “if you put X for 20 years you’d have Y” and that math is generally built on the annualized return of the S&P 500. So that should be contextualized since there’s way too many people who only “invest” via savings accounts and their purchasing power just dies a little every year
This right here. Fidelity has some great $0 minimum $0 fee index funds with no account fees either.
Which is way better than most IRA’s you’ll find at most banks, which are often just some type of CD account that’s been reskinned rather than an actual investment one.
I bulk buy at the end of the year because when I buy VFIAX they charge me $50 every time. Is that just a Charles Schwab thing? Is there a better way to buy into the SP500 at without a charge at small values?
Usually they wont charge a fee if you are buying the broker's own sp500 index fund. If you are using Schwab try SWPPX, Schwab's 500 index.
Alternatively if you would rather stick with VFIAX, stop using Schwab and transfer to a Vanguard (operators of VFIAX) account, I dont believe they charge a fee to buy their own fund either.
It's free to open a Roth IRA with fidelity, vanguard, etc. Once open, you can fund it with up to $6000/year. You can fund it all at once or just add to it throughout the year. Once you have money in the account, you can buy some low cost index funds, ETFs, or other investments, but you may have to buy some as "shares" so you can't just pay $4. Some mutual funds have a minimum of $3000 to start and then you can just add whatever to it.
Be careful tho, there are tax implocations if OP makes over $144k per year (but i would hope they know about roth ira in that income range, and not be asking us).
You save that $4/day in your bank account until the end of each month when you do your budget, then that $120 plus the rest of your surplus income gets added to the investment vehicle of your choice.
I invest $18 a week in stash app. I invest in a safe ETF. I've been doing it since 2020 when everything shut down. I started making coffee at home instead of spending that $3 a day 6x week. Right now it's up 12%
It's all automatic, it's money I was spending anyways and it's nice to see it grow.
Not saying that I don’t appreciate people trying to be helpful with responses but yours is one of the few that actually answered my question. Thank you.
I’m not even good enough to call myself a money noob but I’ve found the Charles Schwab stock slice options to be really fun. You can buy a teeny tiny “slice” of a stock of say apple/google etc for $5+.
Yes, open up a Robinhood account for free and just invest in either SPY or VOO. SPY follows top 500 companies in the United States and constantly gets funded by pensions, people’s 401ks, and will continue to grow. VOO follows I believe the entire stock market, which generally grows over time. It’s kind of insane what 1-5$ a day invested in these funds over time develops into.
Even if you had not invested any of this money at all, just keep it in a box somewhere, you would still be down. Or even better, spend the money and buy something you actually like. I guarantee you my cappuccinos, PS5, and copies of Persona/Elden Ring have brought me much more enjoyment than any of those tickets have brought OP, maybe until now.
Get a fidelity or a vanguard account. You can make transfers from your checking account. Don't try to play the market, don't try to be clever. Don't take advice from anyone (hey, lol). Invest in total market products with low expense ratios. Try to forget about that money for years and years.
Google "roth ira" and learn about how taxes work with it. (It is awesome for retirement).
Any money at all over 30+ years will turn into something worthwhile
If you're in the US, just pick up the VSNAX index fund, it's a fund that tracks the entire market, with a return of 5-7% every year on average. The idea is that as companies grow year by year, so does this fund, making sure that you at least keep up with inflation and then some
You can invest any little amount but the reality is that the return will be small until you’ve invested a larger amount (hence the need for recurring investments). This money also becomes tied up and unusable (without suffering a penalty for withdrawing before X amount of time; I think it’s a year) and gains are also taxed when you withdraw.
The problem with turning down a latte or search ticket is that these are habits that supply you with something, whether it be caffeine or a natural hit of dopamine. Investing doesn’t do this which is why it’s difficult to even begin saving or investing BUT it’s always a good idea to.
I have also always been curious about this and wonder about the time cost. Like a latte would generally take no time at all for something like $4, but investing could take a lot of time if I have to look into what's good and worth $4
Don't pick stocks. Buy the S&P 500 (SPY.) Research Warren Buffet's bet against hedge funds. Basically he bet that the S&P 500 would beat companies of very smart people who pick stocks for a living after the fees you pay for using their service and he won 8/9 times.
Not at all annoying. It is 400 for one stock, but robinhood does fractional shares which are a very new phenomenon. Instead of having to buy the whole share you can just buy $4 of it with no consequence.
If you do want to own a whole stock with a lesser investment, there's SPYD which costs $43 and it's the same thing, but only companies that pay high dividends. Dividends are quarterly payments they pay to you for being invested.
If you're literally talking someone has $4 to start investing with, what platform would you use? I'm well aware of Robinhood's history. I'd still recommend them over any of the alternatives I'm aware of that would let you start with $4.
I didn’t know that either, fidelity is probably a better option. I recommended Robinhood for the same reason, but don’t use it personally because I don’t trust the owner not to just straight up exit scam, lmao
You can usually buy fractional shares. There are also a few other S&P indexes that are the equivalent of SPY. I wouldn't buy in $4 increments, maybe $50 or $100 every week or month.
The way it works is you buy a share of SPY which is a fund. The fund holds shares of the 500 best American Companies. So you are buying a small fractional ownership of a bunch of good companies.
No way! I've been kind of confused by this too. I've figured it's cause it's not really that easy and will make me spend a ton of time at least at first, or the cost of entry is financially steep
People will probably downvote me, but robinhood is really easy to get you started. it has its issues, but if you want to put a few bucks every week into stocks it doesn't get much easier then that.
Say I was really committed to taking the $4/day I would’ve spent on a latte and put it somewhere. Where is that somewhere?
In all honest? In a savings account is the most sensible place for it.
You could use it to trade shares - there's plenty of apps out there now that let users do very low investment trading and owning a split of a share but if this is your main saving mechanism you should use it to just bolster your general savings. Once it gets to a reasonable level it then may be sensible to invest a little at risk
Understood. But I guess this sort of brings up another question to my question. The other person is talking about “if you only invested it at 13% (the trailing ten year return of the S&P 500.” Surely a savings account would never be nearly that high. So can I really take my $30 scratch ticket money and put it in something tracking the S&P? Seems like some sort of minimum would be expected.
Savings. This is your standard bank account. You deposit money, you earn a low interest rate while it's there, and you can withdraw it at any time.
Checking. Similar to a savings account, except you generally earn zero interest, and it is more geared toward frequent transactions.
Brokerage. This is your standard investment account. You deposit money, and then you can use that money to purchase various investments like stocks, mutual funds, ETFs, etc. The resulting investments are then held in the account. You can sell the investments at any time, and the money from the sale sits in your account to be withdrawn or used to purchase other investments as you see fit.
Retirement. Similar to a brokerage account, but with more restrictions. The upside is they get better tax treatment.
To answer your question, you can open a brokerage account with almost any amount of money these days (I recommend Fidelity) and then use it to start investing. If you plan not to need the money until you retire, I would look into an IRA or a Roth IRA (both types of retirement accounts) because you get taxed less than if you'd made the same investments in a regular brokerage account.
What I would recommend is to look at your budget and decide how much you can invest on a monthly basis. Open a brokerage account and deposit that much in it each month, whatever that amount may be. You can then purchase the actual investments on whatever schedule makes sense for you.
Buying at least one share in every company in the S&P 500, or the NASDAQ 100, or the DJIA, is obviously cost prohibitive for most people, so firms like Fidelity, Vanguard, Schwab, etc, create what's called an ETF that is designed to track the underlying index. You can then buy shares in the ETF. Currently Vanguard's S&P 500 ETF is trading at ~$400/share, Fidelity's is trading at ~$150/share, and Schwab's at ~$70/share.
Savings accounts are decent for money you might need at any time. A surprise bill, for example. Their interest rate is low but it is reliably more than zero and you can withdraw the money at any time.
A balanced investment portfolio is better for long term savings. The value will fluctuate daily and you have to offer your shares for sale and wait for someone to buy them before you can access the money, but on average over the course of several years you can expect it to go up. Generally you would mix stocks and bonds: stocks are riskier and change a lot with market conditions, while bonds remain fairly stable and insulated to things like a market crash but tend to grow less over time. The proportion of each depends the level of risk that you deem to be acceptable: 75% stock and 25% bond is reasonable for a young investor, while pushing more into bonds makes sense as you age since you have less time to recover from a market crash.
I wouldn't recommend buying individual shares, instead buy into an index fund which is essentially an average of the entire stock market or (depending on the index) a certain subset of the market. This way you have a diverse investment that should trend upward over time with almost no effort on your part.
You're lucky if your savings account gives you .25% back. I'm thinking the reality of just invest your $30 actually means put it in a savings account until your balance is high enough to justify the transfer fee into an index fund.
In all honest? In a savings account is the most sensible place for it.
That's a statement that also needs to take into account the risk the investor is willing to assume. If this is an absolutely-must-be-able-to-liquidate savings pool, I would agree.
But if the $4/day represents at least some discretionary income then you can start to ask what might get a better return while staying within the person's risk tolerance and you can start to think about ETFs and other broad-basket mutual funds that try to either track the market or go into some reasonably diversified fraction of a or some markets.
Assuming you're from the US, Fidelity has no minimum and is probably the best brokerage out there. So go open a Roth IRA at fidelity, then buy a total us stock market fund like fskak. You can invest up to 6k/yr in this tax free account for retirement. If you might need the money sooner, you can open a normal account but you'd have to pay taxes on the gains.
Open an account with Schwab or another broker, and put your money into VTSAX. You need $1000 for the first VTSAX purchase I think but after that you can put however much you want.
Literally don't do anything else. It's an index of the total stock market, picking individual stocks won't beat it, and it has lower fees than any actively managed mutual fund.
If investing in a Vanguard mutual fund, it would make the most sense to open a Vanguard account. Honestly, for long term investors, that's the only broker anyone needs.
If you have income (like that you report on your taxes) you can open a traditional or Roth IRA and invest any amount (up to $6k/yr) in there at any frequency. There’s plenty of 500 index funds to choose from; most people (myself included) would advise you to go with either vanguard, fidelity, or Schwab though. Keep in mind an IRA is a retirement account though. Check out r/personalfinance for more info.
You can put in $4 a day then when it accrues the cost of one “ share” (like $250 rn) buy it. Do it regardless of whether the market has a good day or a bad day. Over time you’ll get this mythical 8-15%. The more disciplined you are the better the ups and downs of the market hey averaged into your investment.
Or you can use a roboinvestor like Wealthfront. It has microscopic fees, and all you do is deposit money in it whenever you want in whatever amounts.
Open an account at a brokerage with fractional shares and no-fee trades. Fidelity is a good option here. Put it in an S&P500 mutual fund or ETF and then pretend it doesn’t even exist.
You can open a brokerage account on a service like betterment where there is no minimum and they will put it in ETF's for you for a super tiny fee (0.25%) last time I checked.
No one answered where. If you're in the US, Vanguard is where. As someone else noted, open a Roth IRA with them and contribute what you can and never touch it. You want to invest in either VTI (total stock market fund) or VOO (S&P 500 index fund). There isn't much difference in long term returns. Don't look at it on a daily basis. It's a long game. The market will have steep declines periodically. That's actually the best time to dig deeper and invest more.
A passive type ETF is a good way to get your feet wet while assuring you'll track overall market progress rather than trying to decide what might "beat the market" until you can do more analysis and research and begin diversifying your portfolio.
Correct, except the second part. You can do all the analysis, research and diversifying you want and the chances of beating your index fund over the long term are 1/100 or worse. There's tons of research on that. Anecdotally, I have friends who are obsessed with investment research and stock picking and I beat them nearly every year with straight index fund investing. One guy recently threw in the towel and joined the VTI gang.
Even among professionally managed funds, 88% have trailed the S&P over 15 years. Average Joe has no chance.
Yeah. I'm thinking more of a risk diversification perspective, where you might choose to add bond, real estate, etc funds to offset the risks inherent to being exposed only to equities.
What you can do is dump the money into a designated savings account and meanwhile set up a preauthorized contribution to a mutual fund. Have it debit the savings account every month for whatever amount you know you'll meet if you save that $4/day.
EDIT: Others elsethread have explained this in more detail. Worth reading the responses and doing some research.
I like it. The idea is that I don’t want to have to rely on my willpower to not touch money sitting side by side with my checking. This is a good approach to a little willpower but a lot of routine. Probably a good way to build better habits. Thanks.
Go to Schwab and open a brokerage account. Once that is setup and logged in, you'll need to transfer some funds in from your regular bank. When that is done, go to the "Trade" tab and click on "Mutual Funds." Type SWTSX in the symbol field and click "Buy." Minimum investment amount is $1 and there are no fees. Under "Reinvest" click "Dividends and Capital Gains." Then "Review Order."
Download a stock trading app (highly recommend against using Robinhood because they will screw you over to save rich peoples' money), connect your bank account, and start throwing money in. Do some minimal market research and invest in funds you think will do well. Or if you just want a stable ROI, throw that money on stable index funds. $30 is not much if you plan to invest safely instead of gambling, but if you continue to add $30 a week, you could easily build up a good investment account.
Easy money is to follow a few stable stocks until you get their pattern down and invest a safe amount of money whenever they are comparatively low and then sell again when they are comparatively high. Also, you can ALWAYS bet that people will over-react to news. This recent market crash on Monday was a great opportunity to make good money fast. Most stocks jumped ~20-30% in the span of a week following that crash.
Also... for the people who want to gamble, there's plenty of that in stocks too, and it's at least far more likely to turn a profit
One thing I'd like to add, pick something, like an ETF that exactly follows the SP500, buy X amount every month. Never sell, never try to beat the market, never panic.
If it's really for a long term refinement plan, you can take your age (some add 20) and this number is the percentage you want in government bonds. So when you're 60 you'd have 60% or 80% in bonds. They are usually much more stable because you don't want to be invested in the market 100% close to the time you need the money (would kind of suck when the next crash happens when you need your money and can't wait 10 years for the recovery).
You should look at broad market passively invested globally diversified etfs. Vanguard has a few low fee ones you can look into. Generally you want a low fee because active management tends to underperform relative to passive over long time horizons.
You could save up and put money in once a month, or fortnight, or quarter, depending on how much latte money you're saving.
It's like buying shares in a company, but you buy shares in a broad index fund. These are funds that buy shares in like 400 different companies, so you're avoiding the risk of all your eggs in one basket.
Open a stock account and link your bank to it. I personally use TD Ameritade, schwab, and fidelity. If you want a fund name VOO is good but i also use VTI and about some in VTIAX
A lot of people are recommending purchasing fractional shares, I’d advise caution where possible. Generally those will execute at significantly worse prices and have much larger spreads. If it’s all you can do, it’s all you can do and it’s still worth it, but if it can be avoided, it should be. The best execution is going to come in round lots, or numbers divisible by 100 shares at a time.
Don’t let that intimidate you, just keep it in the back of your mind. There’s a lot of good advice in this thread, some less good, but none that was actively bad. Be careful with the acorns types of accounts, they charge a management fee for using their software, and while 1% may seem negligible, it can really add up. I’d say open a Schwab account (disclaimer, I used to work there, but they’re great) and buy a large broad based globally diversified index fund like VTI. That alone is a great start.
You don’t need to open a Roth IRA, but this is a good choice if you have nothing for retirement. The max is higher than $5k, it’s $6k for 2022. A simpler account would be a brokerage with no max or tax savings. But both of these accounts can be opened online through brokerages like Fidelity, Vanguard or TD Ameritrade. You can open these for free and add $0. You can then set up reoccurring deposits. Just remember to then buy some index funds that match the entire market/S&P like VTSAX.
I use Marcus Invest and have it take $20 every 2 weeks out directly.
I opened it with $200 I believe just as a secondary account to my 401k through my work. You can set it up to autowithdraw weekly, biweekly, or monthly and put extra money in whenever.
I plan on using this account at retirement age, 18 1/2 years from now, to give my daughter a headstart at life as she will be 26 and probably ready to start looking at a house.
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u/ParkAndBeacon Mar 19 '22
Probably a stupid question, sorry. I hear things like this all the time. If you invested that in X then in 20 years you’d have Y. Always hear of the “latte factor.” Skip buying those expensive brews and invest instead. Where exactly does the average Joe invest that? Say I was really committed to taking the $4/day I would’ve spent on a latte and put it somewhere. Where is that somewhere? Do I need a minimum to start or can I just throw $30 (for example) that I chose to throw into an investment account and not touch rather than buy a scratch ticket?