🤠 How ETFs Allow You to Make Grand Investments For Under a Grand

Day 30:   Investing Is Less Scary Then Not Investing

by Edward Smith

04 Aug 2020

What is an ETF?

If you read my last article entitled  🤠    How to Keep Your Investments Simple and Effective, you would have learned that I was looking through different investment types and ran across something called an ETF or Exchange Traded Fund.     Your inquisitive side might be asking.   What is that?

ETFs or Exchanged Traded Funds, are basically small mutual funds that you can buy on the cheap.  ETFS do not require an initial deposit of a thousand dollars, like their larger mutual fund cousins.   The cost to start is much lower.   With ETFs You buy a share of the ETF for whatever the market states the ETF's share price is at the time of your purchase.  

So for instance, if the ETF you want to buy has a share price of $160.00 you pay $160.00, you now own a share, and that's it. When you raise up some money, you come back, find out how much things cost on that day, and if you can pay, you buy another share.   

Outside of that, mutual funds and ETFs basically work in the same way.   I think of ETFs like the child, and mutual funds like the parent.   If you inspect them under a microscope, you'll find out both the parent and child contain the same ingredients.   It's a loose metaphor but stick with me here.

Vanguard's website appears to support my parent kid idea.    For instance, I currently invest in an ETF called the Vanguard Total Stock Market Index Fund ETF (VTI).    This ETF mimics one of the major stock market indexes that I'm interested in following.   It's what I was going to get when I was looking at mutual funds.

If you go visit the website for that ETF you will find a link to a mutual fund called the Vanguard Total Stock Market Index Fund Admiral (VTSAX).   So.   What is that?

It turns out those two things are mirror images of each other, except one is big, and one is small.  They invest in the same exact companies.   The math behind them is basically identical.    Works for me.

I've been investing in ETFs every month to two months ever since.  I love it.

What I Did

I started investing in ETFs about eight months ago and because I got interested in it, I have managed to save up around $2,000.   It started, because I made the decision to hold back some of my blow money, but it became bigger after that.   

My plan was to just put $100 away each month, but then I became excited about doing it.   Other money began to find it's way into the mix.   I invested my birthday money, and then I invested extra portions of my blow money when I thought I could get away with it.    I kind of went a little overboard, so I had to back up and learn to slow things down.   Investing can get really addictive.       

  

Investing is also easy.  Many companies have worked diligently to make the process accessible and understandable to the public.   If you are just starting out, I recommend you start up with a mutual fund from Fidelity, or go with an ETF with either Vanguard or Fidelity.   

Both companies have made it their mission to keep their fees low, but Fidelity doesn't set a high minimum to begin a mutual fund.  You can actually start a mutual fund with them for a dollar and begin investing today.   

What I like about Vanguard, is I know them and trust them.    They've been in the game for longer, and they never try to sell me anything.   That's why I went with a Vanguard ETF.   For me, ETFs removed the barrier to entry, and I was able to start sooner then I expected with a high quality investment.    For me, it's worked out very well.

When you start, look around.  There may be other options.  Just don't get scared by investing.  

Only invest what you can afford to lose, but don't lose because you decide to not invest.   

Conclusion

You can do this.   People have gone out of their way to make the process accessible and easy to begin.  You don't need to do anything dangerous.  You can play it safe.   Nobody is watching.   Just make sure you do it, and do it consistently.  It's worth your time.  

Be intentional and consistent.  Once you begin, leave it alone.  The point here is don't touch it.  Investments take time to grow, but they can get quite big.   Let the investment do it's job.    Your future self is counting on it.   Start investing today.

I Hope You Enjoyed This Article.

If You Did, Stop by Again.    I'll See You Next Time.