When I first came up with the idea for this website and wrote my inaugural post: 5 Myths About Coronavirus and the Economy, I received a lot of positive feedback. While soliciting ideas for subsequent posts, many people suggested writing on the topic: “How to invest $1,000.”
I have to admit, my gut reaction to hearing this suggestion was never pleasant. I always felt bummed out, but I wasn’t sure why. Frankly, the topic bored me. Initially, I told myself to fight through it, and just write a post about how to invest that damn money. After all, so many people were suggesting it, it had to have merit, right? So I went to Google in search of ideas, and found hundreds if not thousands of sites devoted to answering the same exact question.
As a fledgling blog struggling to gain traction in SEO, the prevalence of this topic didn’t ease my concerns. I stopped writing for days, days turned into weeks. I stared at my little Google Doc where I generate drafts and ideas, while chewing over that question:
“How should I invest $1,000?”
Finally, in a bout of frustration, I wrote down all the reasons why I hated this question. Lo and behold, words starting pouring out, and I realized that I found my post.
The purpose of this blog is to both educate and entertain. I write about personal finance, because it’s an area that’s familiar to me, and one that many friends have approached me about over the years. When developing the concept for Bear and the Bull, I knew however, that I needed a specific angle. I found the bilingual niche as an offshoot of my own personal background, but there’s more to my mission than that.
The internet has democratized access to so many topics that were once hidden behind esoteric walls. Finance has certainly been one of these, and the proliferation of countless budgeting, personal finance, and investing “how-to” blogs is evidence of this. As I continue to find my voice as a writer and narrow my subject matter niche, I know for sure there’s one thing that I won’t do.
I won’t give you advice I wouldn’t follow. I would never listen to someone who told me “how” to invest $1,000 without knowing a single thing about me. And I don’t want, or expect you to, either.
I want to give you another perspective on how to think about personal finances. I don’t want you to fall prey to bad finance advice. The only way to avoid is to become savvy, and that’s what I’m here for. Part of being savvy is recognizing which questions are useful, and which ones are just baiting you in to bad advice.
So without further ado, here’s the 3 money questions you should start asking…and the 4 questions you shout start asking instead.
1. “How Should I Invest $1,000?:
This is one of the most commonly asked and searched topics in the personal finance and investing space. “I have $1,000, how should I invest it?”
I dislike this question for many reasons.
First of all, sorry to say, but $1,000 isn’t really that much to play around with. With the commissions that brokerage houses (E-Trade, Charles Schwab, etc.) charge on transactions, you’re really better off putting this aside into a high-yield savings account, retirement, or paying down a debt.
Second, this question ignores context. What if you went to the doctor and described your symptom as a headache, and she then proceeded to diagnose you with a tumor without even checking your vitals. Would you trust this recommendation? So why would you trust someone on the internet to tell you what to do with $1,000 without any additional context?
Your age, financial goals, risk profile, and financial profile are like the body temperature, height, weight, and blood pressure measurements during a doctor’s visit. They help us capture what’s going on with you at a moment in time, and are the foundation you use to determine next steps.
2. What’s a stock? How do I invest in one?
A quick Google search for “what is a stock” yields 5,360,000,000 results.
Odds are high that at least 1 one of these will answer this for you succinctly. We’ve compiled a few of our favorite links for explanations that we think are clear cut and easy to understand:
- https://www.nerdwallet.com/blog/investing/what-is-a-stock/
- https://www.nerdwallet.com/blog/investing/how-to-buy-stocks/
- https://www.investopedia.com/terms/s/stock.asp
- https://investor.vanguard.com/investing/investment/what-is-a-stock
And here’s a bonus article on how the stock market works.
Unless you are independently wealthy and have superior financial acumen (in which case, you’re probably not the target audience for this site), we strongly suggest you refrain from investing in individual stocks as part of your investing strategy. Most investors are better served investing in index funds (ETFs, mutual funds) which we explain will explain in a future article.
Questions like “What’s a bond,” “What’s an ETF” yield similar outcomes. If you are curious, here are some resources we think are helpful:
- https://www.nerdwallet.com/blog/investing/what-is-a-bond/
- https://www.nerdwallet.com/blog/investing/what-is-an-etf/
Of course one must have a foundational understanding of financial products before committing to an investment. That’s why we’ve provided some helpful resources for you.
3. What’s a good stock to invest in so that I can “play around” and “see how it does”?
“There’s no such thing as a free lunch.”
“A penny saved is a penny earned.”
“A fool and his money are soon parted.”
Stop me if you think you’ve heard this one before. Your hard-earned dollars are nothing to “play” with. It might sound boring and unappealing, but successful personal investing is all about patience.
You know that saying “buy low, sell high?” Would it surprise you to hear that most people “buy high” (meaning when the market is booming) and “sell low” (panic selling, like during Coronavirus), and suffer instead? A fool and his money are soon parted. Think about that the next time you try to make bets and play games with something is sophisticated and enormous as the financial market.
So instead of falling down the rabbit hole of technical financial jargon that probably won’t be relevant to you, we suggest you ask these four questions instead:
- How is my financial health?
- What are my financial goals?
- What do I have to do to close the gap between where I am and where I want to be?
- What is my investing personality?
Personal finance is “personal” for a reason – it’s all about you.
So instead of asking the internet “How should I invest $1,000,” first figure out what $1,000 means to you. For some people, $1,000 is an entire month’s worth of wages. For others, it may as well be considered a rounding error.
In the words of the great Arthur Ashe, “Start where you are. Use what you have. Do what you can.”
