For Beginners

Becoming an investor

Lesson in Course: Investing basics (beginner, 4min)

Squirrels are investors. Are we investors?

Eureka!

What it's about: Investing is about using our resources in a way that will give us more in the future.

Why it's important: Investing is essential for financial security.

Key takeaway: We shouldn't let popular misconceptions stop us from investing.

Squirrels are a fairly common sight. They're obsessed with nuts and bird feeders. Here's a mind-blowing fact: some squirrels bury up to 10,000 nuts every fall to prepare for the winter. 

Every year, squirrels forgo consuming some of their resources today so that they can enjoy them tomorrow. Some of those buried nuts grow into trees that will produce even more food for them in the future. This behavior is investing in a nutshell.

A happy investor

We are investors

Investing is something that we already do, whether we are aware of it or not. We are investing daily as we juggle our resources like time, emotions, and finances. We can all become better investors with a bit of patience and practice.

When we invest financially, we buy assets with some of our money today, expecting they will be worth more in the future. 

 
What is Return?

The amount of additional money we made from our investment is our return

Money is one of the biggest sources of stress; however, investing eases this burden by building wealth and financial security.

Investing allows us to secure our future

Investing is essential for financial security because it can:

  • Make extra income to cover expenses
  • Be a safety net for unexpected emergencies
  • Grow our money for future goals in life, like buying a house or retirement
What is Financial security?

The peace of mind we feel when we aren't worried about money. It means we have enough to pay our expenses, cover an emergency, and fund future financial goals.

 

Investing misconceptions

There are a few common misunderstandings about investing that prevent many people from getting started.

Misconceptions make investing intimidating

One of the biggest misconceptions is that it requires a lot of money. In truth, we don't need any money to open an account! Many companies allow us to open an account with no minimum deposit. They also allow us to make our first investments with less than $100. 

All we need to invest is a little bit of time and money, usually less than we realize.

Other popular myths
  • Investing is like gambling.
  • Stocks are the only way to invest.
  • I have to pick the "perfect" stock or investment to be successful.
  • It takes a lot of time to invest.
  • I need to sell when the market is in trouble.
  • The professionals always beat the market.
Watch a short video busting six investing myths!
https://www.youtube.com/watch?v=XMabr2LDzdE

Investing truths

Some people treat the markets like a casino, trying to get rich quickly by placing super risky short-term bets. Speculating like this catches news headlines but don't be fooled; this is not the same as investing. While investing does require taking risks, we control how risky it is based on how we invest and what we invest in.

A few other truths
  • We can lower risk by holding many types of investments, not just stocks. 
  • We don't have to pick the "perfect" investment to be successful. 
  • The odds of losing money drop close to zero if we hold investments that look like "the market" for the long-term (10+ years). 
  • Investing is exciting, but it can also be very passive, checking on our portfolio once every few months if we want.

Actionable ideas

If you haven't started investing, try to identify the reasons why. These misconceptions could be getting in your way. Keep learning on Archimedes to gain the confidence to overcome them. We'll also help you find the right tools to get you started.

The world of investing is enormous, with many forked paths. Even if you're already investing, discover something new and learn from experts on Archimedes.