You Need a PLAN

“A journey of a thousand miles begins with a single step.” - Chinese Proverb

When deciding to start investing or get your money working for you, there are many strategies to choose from and usually many steps involved. Often, you need to start from nothing.

Maybe you don’t even know where to begin.

Maybe you already have some traditional investments through your bank or insurance company but want to explore more.

Maybe you need to just tweak your portfolio or change your strategy.

We all start at different places. I remember not knowing anything about investing and I assumed you could just buy a stock at $1 and it would skyrocket to $1000 in a month and I would be RICH!

I was a little disappointed when this wasn’t the case..

Regardless of where you are starting from, I suggest that you take the approach of starting small.

This means, initially, you should care more about learning the ropes than making a fortune overnight. When you learn about a new way to invest or a different approach to building wealth, or even starting a business, you would be doing yourself a big favour by dipping your toe in the water and seeing how it feels.

By starting small you not only lessen your risk, you gain valuable experience in the process and most importantly, you a more likely to actually take that first step. Most people dream or talk about changing their lives, but few actually take do anything about it.

“How do you eat an elephant..? One bite at a time” - Desmond Tutu

I recently wrote an article about money and emotions where I suggest that our fear or anxiety about money and investing is usually just a result of lack of knowledge about it. Invest can be scary, but the more you know, the less scary it is. By starting small, you can gain experience, which is super valuable, without too much risk.

In order to ensure we are making rational and productive choices when we put our money to work, we need to have the proper context. We need to have done it before, or have a sound strategy to follow. We need a certain amount of confidence to move forward intelligently and try to leave emotions out of it. Math rules when dealing with money, not feelings.

If you want to start building a money machine, like I speak about in my book BYOB, then it would be a great idea to learn the principles first, then start small. There are a TON of great books out there that you can learn investing principles from. I wrote about my favourites here. Please do yourself a favour and learn as much as you can. 

How To Begin Investing

Once you have found a strategy that you are excited about you are ready to begin your real education. Let’s assume you find my strategy of buying stocks for dividend income enticing and want to get started. Your passive income plan would go something like this:

Start by researching brokerages. There are many great articles online about where to find one that suits you. Usually one that is tied to your bank works great. I use my banks investing service and I love it. It makes things easy to access via my online account, and transferring money is a breeze. 

Then start researching stocks. The online brokerages have wonderful tools for doing so, or you can go to TSX.com or Yahoo finance  and they have vast amounts of information to help you decide. 

Once you have picked a brokerage, have an account set up and have researched your stocks, transfer a little bit of money into your account. It could be $10. It doesn’t matter the amount, just see how it works and see how it feels. This might be a big deal for you or not, but it is suddenly not theory, it is real. You are dealing with real money now. You must get used to this feeling so starting small will be a great way to get into the groove. 

Once you are comfortable having a bit of cash in your account it is time to buy a stock. Take your list of stocks that you have researched and qualified as good dividend yielding cash-cows and buy 1 share of the safest possible company. 

You Are Now An Investor

Congratulations! You are now doing something to move your life forward! Scale is not important here, it is the action. It is the act of putting a plan into reality. If you can afford the time, let the stock sit in there for a while. Watch as the price goes up and down  with the ebb and flow of the stock market. 

As a beginner, you will probably be compelled to check your portfolio every five minutes. You will be watching it non-stop and you may get pangs in your stomach every time your well-researched, wall street darling goes down in price. You will be elated and giddy when the price goes up. You will feel like a genius when it goes up and a loser when it goes down. This is natural, but unnecessary. You must get used to this and learn to accept the natural fluctuations. If you are following my plan, you really don’t need to be too concerned over these changes.

When you are comfortable with this, you can start adding more cash to your account as you slowly build up to having an automated contribution amount every month. This will really start to prime the pump and get you excited about your new plan. You are beginning to feel like you are back in control. It feels good. But as the amounts go up, so does the anxiety. This is normal as well, and you can always just keep money in your brokerage account as cash for a time to get used to it being there, without any risk. Don’t take too long, you need to get it to work. Idle hands do the devils work. 

You can now start to buy a little more stock, hopefully diversifying amongst different sectors of the economy. Make sure you have picked good solid blue-chip companies that everyone has heard of and everyone uses. This is the fundamental idea of value investing. Do not go chasing after get rich quick stocks or “tips” from your brother-in-law. 

The Payoff

Now comes the really fun part. If you have chosen to follow my investment strategy, you will eventually get your first dividend payment. This is like Christmas! You have received free money! For doing nothing! Pennies from heaven. This is where the rubber hits the road. Once you have tasted the sweet nectar of monthly distributions you can never go back. You will be hooked! You will want to commit fully to the plan. This great. But try to keep things in perspective. You need to keep learning. You need to keep growing. 

So at this point you should keep researching stocks and slowly but surely constructing a reasonable “foundation” upon which you can build. You need to walk before you can run. The advanced strategies I teach in my book can be implemented once you have become comfortable with these preliminary steps. If you have gone this far, you have set yourself up to do great things. You are ready to take your life where you want it to go. 

Even if this is as far as you ever take your investing, you will be ahead of the game. You will have created a source of passive income that, if done right, will continue to send you money for as long as that company exists. Some companies have been giving dividends for over a hundred years, without fail. You can be part of it.

By starting small, you have gained a huge amount of trust, experience and emotional fortitude that will allow you to move forward in your investing journey. The knowledge and experience was gained without a ton of risk, and is so incredibly valuable. Nothing can compare to real-world experience, and experience can be gained without having to risk it all. 

Happy investing!