Investing for Moms: Top 3 Things You Need To Know To Start Investing In The Stock Market
I know I'm not the only millennial mom interested in growing my money, so I asked Emily, a management consultant, mom, wife, and blogger at MommyInvestor.com, to write a guest post here. She simplifies investing (yes, it can be as easy as shopping Amazon Prime) and relates it back to mom life. Learn how to sleep train your stock portfolio!
I’m convinced the investment community purposely tries to make investing intimidating. Unfamiliar terms, fancy charts and numbers thrown around to confuse us. But in reality, investing isn’t all that difficult and if you’re a mom raising children, I put my personal guarantee that child birth was more scary and painful.
I believe everyone should be able to invest in the stock market without fear of the unknown. Really, what makes investing intimidating is the notion that you have to understand complicated business processes and math formulas. However if you can shop on Amazon (and enjoy it!), you can purchase stocks. Did you sign up for Huggies Subscribe and Save to have diapers automatically delivered to your house every month? What if I told you that investing can be just as easy and you can have your account automatically do some of it for you? (learn more about DRIP) See, it’s really not that scary!
I’ve complied three basic things that I believe will help you get started on your investing journey. Even if you are a seasoned investor, these three items should be reviewed periodically to ensure you are on the right track. Best of all – each investing term or description will be explained from a mom’s perspective!
1. Determine if you want to do it yourself or pay someone else – Daycare vs. staying at home
Investing really comes down to two simple choices. Either you do it yourself or you pay someone else to manage your investments for you. If you have wrestled with the thought of staying at home or putting your kid in day care, I’m sure you have had the same thoughts: is it worth paying the daycare fees? Will my child be safe? Can I do a better job myself? Here is some commentary around both investing options:
Doing it yourself – it’s very simple to open an investment account at your bank. Just walk in and ask to open a self-directed account. After you have the account set up, you simply log into that account online (just like you would log into your chequing or savings account) and you can transfer money in and out to purchase stocks, bonds or ETFs. You are usually charged a flat fee per trade (in Canada it is around $9.99). Ask your bank of all the fees prior to opening the account.
Learning about what to invest in can be tricky and it will depend on if you want to actively or passively manage your investments. Passively managing your investments is a great way to go and you can do so by buying ETFs. You can learn more about those here. You can also passively manage your account buying stocks or bonds.
Paying someone else – there are a couple of options here. There are many asset management firms (eg. Fidelity Investments, Vanguard Asset Management, BlackRock, J.P Morgan, PIMCO etc.) Here is a link to 400 asset managers in the United States. The biggest question to ask when making your selection is how much it will cost to have the firm manage your investments. The fees can range from MERs (Management Expense Ratios), commissions or buy and sell fees. Before you make a decision, make sure you know exactly how much it will cost.
Low cost options to asset management firms are called robo-advisors. They are exactly that – computer programs and advanced statistical information managing accounts. Why are they cheaper? Well for one, a company doesn’t have to pay a big salary to a human advisor. If you want to learn more about robo-advisors, click here.
I truly believe everyone can manage their own investments. By purchasing a variety ETFs you can have a great investment portfolio that requires little to no work. Plus, you can probably take advantage of your banks Dividend Reinvestment Plan (DRIP). You can learn more about DRIP here.
2. Determine your risk tolerance profile and your Investment Goals – Sleep Training your Stock Portfolio!
A lot of my friends have made comments that investing in the stock market is risky. Sure it’s risky if you are constantly looking at the ups and downs. Risk tolerance is your ability to withstand the daily variability of the stock market. If you went through sleep training (in any shape or form) think of risk tolerance as your ability to withstand sleep training crying (in my case, my husband took on most of the sleep training!)
Those with high risk tolerance levels tend to invest in stocks that have the potential for very high returns. However, there is just as much chance those stocks go to zero and they lose everything. These investors have the ability to ignore the crying variability and assume the risk that the stocks could go to zero.
Those with lower risk tolerance levels don’t want to take on any risks with their investments. These investors buy stocks that rarely see extreme highs or lows.
What type of investor are you? If you’d like to find out, take this short questionnaire.
3. Resist the Urge to React to Every Up & Down – The Crying Pooper!
When my daughter switched to solid foods she had a difficult time digesting and often ended up constipated. Every time she went #2, she cried. It broke my heart. She was in so much pain. I would pick her up and comfort her. Eventually her system matured and things flowed a lot more softly. However the crying remained. Since I reacted to her crying every time, she got used to it.
Investors pick up the poopy baby. Not literally, but every time there is a market downturn, investors panic and sell. If you have decided to be a passive investor, ignore the noise. Resist the urge to pick up the crying baby. Take a look at the chart of the S&P Index below. If you had sold all your investments during the recession back in 2008, you would have lost out! The market has gone up, WAY up since then.
I hope you have found this post useful to start you on your investing journey. If you would like more information on stock market investing, please visit mommyinvestor.com
Take the plunge and start investing. You put up with screaming kids, lack of sleep and a messy house. Trust me when I say this will be a walk in the park!