Simple steps to start building financial security in 30 minutes
No matter how busy you are, how much responsibility you have, or how little money you have, you can start investing. It’s not as difficult as you’ve heard, you don’t have to be a day trading caffeinated maniac, and you need no special skills, knowledge or expensive trading platforms. You just need about 30 minutes to get started.
Your journey to financial security is easy to start! Just consider our step-by-step process as a guide map to help you get started. It’s quite easy to invest in the 21st century, as compared with the labor intensive process when I was a kid. Apps and websites make it quick, easy, and painless.
Step 1: Find the Money to Invest
The most important thing about dividend investing is to start, start early, and invest often. The more shares you own, the more dividends you earn to reinvest in more shares, and more shares means more dividends (cash) for reinvestment — the cycle repeats! Don’t worry if you have too little to invest, just start.
Currently the median share price in my most recent list of quality dividend stocks is about $83. So you can see that getting a lot of shares is a one-step-at-a-time proposition. I would say that a good starter investment would be $250. But if that’s not possible for you, there is a painless way to build up to that to that amount.
Through the use of a series of new services, you can build a chunk of savings through simple rounding up of amounts on your transactions. Check out these guides to the round up savings apps:
- Nerd Wallet’s 4 Best Money Saving Apps
- Part Time Money’s best savings apps
- The Penny Hoarder’s apps to save money
Regardless of the app you choose, make sure it works for you, doesn’t have fees, and is easy to transfer the money back to where you need it.
Other ways to start small
Check out the resources below that may be of help in starting out. Some DRIPs (Dividend Reinvestment Programs) have a $10 minimum investment. Heck, that’s only giving up 1.5 mocha lattés to start towards financial security–a veritable bargain!
- Visit DripInvesting.com for a list of the best companies with no-fee investments done the old fashioned way–by mailing checks
Step 2: Open a Brokerage Account
In order to buy dividend-paying stocks, you’ll need a brokerage account. And again, in the 21st century, this is easier than ever!
Nerd Wallet has done the time saving research for us with their great reviews and summaries. Check out their recommendations for Online Brokers for Beginners. I have used Fidelity for over 30 years, and have never had a problem with them, plus they don’t charge to buy stocks, have excellent 24-hour customer service, and provide automatic dividend reinvesting. I don’t recommend Robin Hood, however, as they do not offer dividend reinvestment.
If you already have an after-tax brokerage account, or a 401k (or other retirement account that allows you to chose individual stocks), you can make your investments there.
Step 3: Fund Your Account
The money you’ve been squirreling away can finally fulfill its destiny: to grow, compound and multiply! It’s time to transfer your investment funds into your shiny new brokerage account where you (yes you!) will make your first investment and purchase a dividend paying stock! Look at you go!
Step 4: Understand our Assumptions
In order to commit to your first investment, it’s good to take this moment to mention the assumptions we have made going into this:
- You are interested in growing your money over time, not looking for a “get rich quick” scheme (that always end in disaster!)
- You have a fairly long investment horizon, i.e., a long time before retirement, such as 10-15 years minimum, so you can take advantage of the power of compounding
- You know your tolerance for risk. If you can’t afford to lose your investment dollars, and don’t already have a six-month cushion of savings put aside, you likely shouldn’t start investing until you have that safety net established. As stocks go up and down in the short term, think about how much of that volatility you can be comfortable with. Here’s a link for assessing your risk tolerance level
- Generally, dividend-paying stocks are less risky and have higher total returns than non-dividend paying stocks.
Step 5: Buy Your First Dividend Paying Stock
This is where we have made it absolutely painless to make your first investment by providing you with a narrowed down list of choices. As always you’ll need to decide what works best for you and take responsibility for your selection. As with all investments, there is a possibility that you could lose some or all of your money.
Our list of candidates for your consideration include selections from the sectors of the market that have generated long term positive increase in value.
If you’re eager to earn your first dividends as soon as possible, you may choose the stock with the closest “Buy Before Date.” And if you want to earn dividends monthly, choose a stock that pays monthly for the added good feelings that progress on a frequent basis brings.
It’s better to invest NOW as waiting eliminates the benefits offered by dividends compounding over time.