I know it’s late February 2021 and I’m probably late with this post, but it’s been busy lately. Also, my employer pays the January salary in February, hence I wouldn’t know what’s left from the December one till I get paid in February. However, the results show that if you start investing in the stock market now, you would be in a better place in a year.
What I mean here is that most people wait for the “right moment” to start investing. That being earning enough to save on the side, find the right brokerage, understand how markets work, etc. Not that these are not valid arguments – they are, just don’t make an excuse out of them.
The sooner you start investing, the better. If you force yourself to do it today instead of waiting for the perfect moment, you would do yourself a favor. Why? Because this brings you one step closer to financial independence.
I’ve “timed” the market and then I screwed up
As I mentioned in an earlier blog post, my financial independence journey started beginning of 2020. In March, when the market went down, I did my biggest investments for the time back then. It was the perfect moment, I felt like I hit the jackpot.
It was the perfect moment because pretty much everything went down and whatever I invested in, would do great. That trend continued in April and May, so I felt great, it was a great moment to invest in US stocks.
However, in September I realized that I miscalculated with my brokerage account and I had to close all my positions. The reason for this was that I found out the charges on my previous account were not making any sense at that point. So I closed all positions and reopened in November.
Start investing in the stock market now
Despite the fact that I screwed up, I knew that now is not the moment to quit. I already had it all. I got my emergency fund set, I knew how to open a brokerage account “properly” and that was all I needed.
Last week we’ve watched a TEDx Talk at home about a guy that hardly had his focus on something. He sucked at school big time. One day in college, he decided to focus on 1 subject for 5-10 mins, do something else, then get back to the same or even a different subject. Repeat. It was a turning point for him.
Why I’m telling you all of that? If you are a person that still hasn’t made the move to start investing in the stock market, try to split the task into smaller ones. Here’s an example:
- Build an emergency fund worth 6-12 months of your living expenses
- Pay yourself first by moving some money on the side on payday
- Do your research and open a brokerage account that would cover your needs
- Do your research and start investing in the stock market now by buying shares of a stock or the SP500 index
2020 was my most successful year financially
Just to be clear: I’m not bragging by saying any of this. I completely realize that I’m lucky enough to not be part of any employer resource action, pay cut, or else. I know that a lot of people were not so lucky and lost their jobs and paychecks. My hopes are that they would soon find their new employer and everything will return back to normal.
In 2020 I succeeded to save about 46% of my income and invested 7% out of that 46%. Yes, I didn’t invest everything and there’s a sound reason behind that. Most of what I saved is still in my account as with my partner we’re planning on few larger spendings in 2021-2022.
Still, 2020 showed me that if I want to and if I plan it carefully, I’m able to save quite a lot. An interesting note here is that last February I took a new job role with no pay raise, which is expected sometime this year. This would only help me to bump up the portion I invest in 2021.
What is in to lose if you don’t start investing in the stock market today?
Let’s say that you invest €1000/month in the SP500 from now on. In theory, the market would always go up, as it is SP500. In multiple places, you would find info claiming that this SP500 raise is 7-10% on average. Even if we’re conservative and expect 5% raise, that would still be more than what you would get if your money just stays in your account.
Yes, SP500 isn’t guaranteed to go up till the rest of our lives, but looking at historical data, the probability for this is not negligible. However, past performance doesn’t guarantee future performance – do your own research before investing.
Being a passive investor and pouring money into the SP500 isn’t a bad thing at all. A couple of days ago I watched a video of a favorite YouTuber – Graham Stephan. He interviewed another favorite YouTuber – TheStradman. Watch the whole video here.
Why is that video interesting? Graham encourages TheStradman to invest $30k/month from his $2M yearly earnings in the SP500 as a retiring fund. Ever thought about your retiring? There’s a lot in this video, I would definitely recommend it.
Adding multiple income streams
One of my main objectives with investing is to add more income streams. As my portfolio is dividend-focused, my long-term goal for it is to pay my living expenses. Whatever I get as dividend proceeds, I’m reinvesting back in dividend stocks right away. It will take time, but eventually, I’ll be there.
If you struggle with building your emergency fund because there isn’t much more to cut from expenses, then another income stream would be beneficial. There are lots of opportunities. The internet is full of guides and tutorials on how you could make money on the side as a photographer, musician, graphic designer, etc.
Yes, not all of us are photographers or graphic designers, so we have to think of other ways to add more income streams. What I’m doing is, I’m participating in auctions. My employer sells decommissioned laptops at a fraction of their market price. I’m participating in the auctions for the possibility of getting one. So far, I got 3.
2021 plans – invest more
As I already started investing in the stock market in 2020, the plan for me is to increase the investment from 7% to 10% (or more) of my income. Not a large bump, but I prefer to do it that way as I learn from my mistakes. There’s no formula for a successful investing plan, so I’m taking it slowly.
In the meantime, I still intend to continue learning from what went wrong and what went well. I’m always looking for other ways to add income streams or cut down expenses. If something doesn’t make sense from a financial perspective, then I’m getting rid of it.
I know that what I’ve already written here isn’t a 2021 resolution, but it’s the closest it could be. Have you thought about 2021 resolutions yourself? What about start investing in the stock market now? Markets would always fluctuate and be volatile, so remember: time in the market beats timing the market.