After reading an article titled Please don't let me buy another dress, written by one of my SWAAY Sisters, Mita Mallick, I was inspired to write this piece. The article got me thinking about how hard we save for that next dress or sparkly top, but how little time we spend looking after our financial future and financial freedom. It reminds me of SJP with all those fabulous Manolos but no savings to buy her apartment in NYC! We splurge on Lululemon leggings (they are so good though!) We are always chasing the coolest pair of trainers. We drool over Meghan Markle's Aquazzura's. All those things are so beautiful, yes, but we don't think about what we are choosing NOT to do when making those purchases instead of investing.
What if instead of buying that next pair of Nike's, you bought a share in Nike? Or instead of buying that new dress, you bought a stake in Vanity Fair corporation? Or instead of buying those leggings, you saved up for a share in Lululemon? I'm not saying we should forego all of our purchases or luxuries. We need to motivate and celebrate ourselves.
But could choosing—just once in a while—to spend the money on something else set us on a path to financial freedom?
Become an owner
It has never been easier to become an owner of a listed company. You can easily set up an account on the app Robinhood or go with a more traditional brokerage like Charles Schwab, Fidelity, or TD Ameritrade. Thanks to Robinhood, they all allow you to make zero-fee trades. This was a significant change from a few years ago when you needed a minimum amount to invest and had to pay considerable fees (USD30) per trade and a percentage of the traded value.
Buy what you know.
If you can't go without your daily Starbucks, maybe you should own a little of Starbucks. If you are addicted to McDonald's, maybe that's the company for you. Can't pull yourself away from the Gram? - think about owning Instagram's parent - Facebook. Addicted to Pinterest, then consider buying PINS. If you can't keep track of how many Apple products you have, maybe now is the time to benefit from that. If you are a tech expert, you might know more about the new companies that will benefit from 5G and cloud computing growth. Convinced that you will never set foot in a retail store again and that the future is e-commerce - consider Shopify, Amazon, Walmart, Etsy.
Investing Myths
We tend to think that investing is for the super-rich and that it is extremely complicated. That it can't be done without a financial investor and that you shouldn't even consider it until having your house paid off and your kids are out of college. The truth is that we are already investing. If you have a pension or a 401k, your hard-earned dollars are being put to work for you already.
So if you think that you could skip that Almond Milk Mocha Frappuccino once in a while, sacrifice that extra dress, or wait until next month to buy those new trainers, maybe you could start owning the brands you love and benefit from the fact that other people love and use them too.
Buy and hold.
Anyone who bought one share of Amazon in 2000 and just held onto it has seen the value of their investment grow from $64 to today’s current share price of $3,322.00. That’s a growth of 5100%! If you bought one share in Netflix in 2010 for $9, it is now worth $513. Not a bad return for a $9 investment!
Similar stories apply to Apple and Shopify. Shareholders did not have to check the share price constantly. They did not need to react to the market and sell and buy again. They just bought a company they thought was a good investment, and that had potential, and they held onto it during the ups and downs and wild rides that the market takes.
Is it too late? The best time was yesterday. The second best time is today. The market returns 10% a year on average, over the last 100 years. It also drops by 10% once a year and by 20% every four years. The earlier you start, the longer you have to benefit from compound interest. If your investment grows by 10% a year, then the next year your investment (US$100 + $10 = $110) 10% = US$11. Year 2 = $110 + Us$11 = US$ 121.
Not sure where to start? A great place to start would be by just purchasing a share in an exchange-traded fund. You can buy a share in a fund that tracks the S&P 500. The fund buys shares in all of the companies in the S&P 500. These are all the top companies in the United States. You can also buy shares in a fund that tracks a particular industry, such as tech or healthcare. This way, you know that your investment is diversified across different sectors and companies and that you are not paying hefty fees. However, you can still benefit from the expertise of the Vanguard or Blackrock fund managers.
What are you waiting for? Your future self will thank you!
WRITTEN BY
Paula Gibbs