The First Steps for New Investors

     So you’ve decided to open an investment account, hopefully with a reliable brokerage like Fidelity, Schwab, or Merrill Edge. Now you want some real guidance with what to buy. Now you need to understand that you ain't no Wolf of Wall Street nor Christian Bale from The Big Short. And you're not going to put all of your money into one equity and try to calculate how you're going to double your money. No. You are going to allow your money to grow as steadily as possible over the next however many decades. To understand the first steps, you need to learn about specific securities that are going to benefit you for years and what they do for you.

     ETFs (Exchange-Traded Funds) are going to be your best friends when you first start investing and will be for decades. The best way to think about them is mini indexes where you buy one share of an ETF, you buy into a bunch of publicly traded companies. A great example is the SPY ETF. It's an ETF that tracks the S&P 500. When you buy one share of SPY, you're investing in the top 500 publicly traded companies in America. There are ETFs that corner more specific markets like QQQ. It's an ETF that tracks 102 companies from the NASDAQ, but about 63% of those companies are technology companies and another 23% are consumer-cycle companies (consumer-cycle companies - companies that produce durable and non-durable consumer goods). So consider this: ETFs fluctuate and change more based on the national/global economy. And major events that affect these economies will then affect the value of the ETF making the ETFs great in combating volatility. There are so many ETFs in the world you can invest in that track different things in different ways and that serve different purposes. You have the main set of financial companies that form these ETFs. These ETF giants are Vanguard, Blackrock, Invesco, and State Street. These companies are your go-to's for ETFs.

     Equities are simple: Common, or preferred stocks. You can absolutely invest a little bit of your account into a company you like. Especially if you see it at a discount for a short-term investment (which rarely happens), but you can do it. Once you have a good amount of your money invested into low-volatility investments is really when it would be okay to invest in common stock. A great strategy for purchasing common stock is more of just a question: “Does this company provide a human necessity?” Then it’s gonna have a good amount of cash flow throughout the years of owning it. These would be companies that deal in providing food, water, housing, etc. These companies would be more non-financial companies, companies that give a product to consumers. If the answer is no, then think about how much we need the service or not. After you answer, you may decide whether to buy a few shares or not.

     You then have REITs (Real Estate Investment Trusts). If ETFs are your best friend, then REITs are . . . I actually don't have an analogy for this one. They're just your “other” best friend. You’d be a really good trio with REITs and ETFs. Usually, REITs are companies that own, produce, or manage properties. These types of investments are great long-term simply due to the necessity of needing a place to live, which makes REITs a great investment with a constant flow of money and an always-expanding market. Every single REIT is required to pay dividends to its investors (dividends - the distribution of some of a company's earnings to a class of its shareholders). This makes for a steady flow of money for investors and with an added minimal volatility long-term.  REITs are amazing for those just getting into investing, and there are so many Reits available. You can just pick one that's highly rated and invest. You just need to find the REIT that gives the best rewards for owning a few shares.

Now you know what securities you should mainly be looking to buy. I'm going to give you some real recommendations. 

     Immediately for ETFs is SPY. I already mentioned what SPY is and what it does. Spy is the most recommended ETF and the OG ETF, literally. It was the first-ever ETF available. 

QQQ is a great combo with SPY since it essentially covers the technology markets that SPY doesn't cover, and is one of the best-performing ETFs in the last two decades. To be more vague, I would highly recommend a type of renewable-energy ETF, anything really that you think would grow at a good rate over the next few decades. A dividend ETF would be great for a diversified flow of money, and is a wonderful way to understand what dividends can really do for you over time. A medical ETF is phenomenal, especially with the instability of COVID-19. And when we adopt the new normal, we’re going to get back to proper medical research making a medical ETF more favorable. Then after that, really whatever ETF seems like a good long-term investment with good returns is what you would want to invest in.

     REITs that I would recommend: One would be something that has low dividends that focuses more on the stock price. Another would be one with a more plateaued price and high dividends. You would need to do some research to find your two. Finding good-fitting investments does take some time and dedication.

     For common stock, I would tell you to pick no more than 3 companies. The amount invested into these companies should not exceed 10% of the account value combined, and they should be companies you use/surround yourself with every single day.

     A general strategy for new investors is to simply think about the value gained over the years and how to achieve that with as little volatility as possible, and to spread your money out everywhere. This would be similar to how you would distribute your weight on a bed of nails.