Updated: Aug 23
‘Focus on progress, not perfection.’
- Bill Phillips
Actions Speak Louder Than Words
Far too often, we are provided with a broad-based commentary on a particular
subject without any tangible action plan on how to utilise the newfound information.
In a bid to break from this trend, I have provide precise next steps that you can take to
ensure that you put the information from my 'Learn to Invest' series' to good use.
The 5 Day Challenge
The thought of creating your optimal investment portfolio and entrusting others with
your savings may seem overwhelming at first, but again, it’s not about jumping in all
I have created a 5-day challenge to help you build momentum. By simply setting
aside an hour each day, you will be able to officially declare yourself an investor by
the end of the week.
Set Up a Brokerage Account
When buying and selling shares, you will need to set up an account with a licensed broker. The Broker will operate as a middleman between you and the market. Through the wonders
of technology, discount brokers are now easily accessible and in plentiful supply.
While these discount brokers provide an automated service with no direct investment advice, they offer a wide range of stocks, mutual funds and ETFs at rock bottom prices.
This DIY approach may not be for everyone, but the low transaction costs and ease of access on offer make these an attractive vehicle for those looking to get exposure to the market for the first time.
There is plenty of information online comparing the pros and cons of various discount brokers — the likes of Etoro, T.D. Ameritrade and Interactive Brokers consistently rank towards the top of the list. With that said, all major providers offer a wide range of product and low transaction costs so no need to get too caught up on the comparison front here.
I personally use Interactive Brokers.
When getting set up, you will need to provide some standard information such as yourI.D and proof of address. You will also need to answer a few questions about your previous investing experience, salary etc. Once you have provided the necessary information, the approval process will typically take anywhere from 3 to 5 days.
Build A Watchlist
As you wait for your account to be set up, take to time to create a list of stocks and ETFs you would like to invest in.
You can set up this watchlist directly on your brokerage account.
This watchlist will change and grow over time depending on what companies you naturally drawn to, but here is a solid base from which to start. Focus on companies you really like, companies you use every day, products that you use today that you believe you will still be using 10 years from now.
Pick 5 well-established companies that you believe have a strong brand and consistent business model likely to provide steady growth over time (think Disney, Apple, Johnson &Johnson, Home Depot, Walmart, Mastercard, Coca-Cola, Nike, Microsoft)
Pick 3 companies that focus on developing innovative technologies with consistent sales growth, ripe for expansion (think Airbnb, salesforce, Veeva Systems, Twilio, Spotify, Atlassian)
Pick 3 ETFs that will provide diversification across sectors and regions. The above-mentioned stock picks are all mid-large cap U.S. companies. Selecting ETFs such as the iShares MSCI Emerging Markets (EEM), the iShares Core S&P Small- Cap (IJR) or the Vanguard Real Estate (VNQ) will provide broader diversification and benefits and ensure your portfolio isn’t overly concentrated.
Remember, this is just a template to get you started. You may choose to take a slightly more passive approach by investing across ETFs only, leaving any specific stock picking or active
exposure to a fund manager.
Either way, it is important to take some time to familiarise yourself with some basic metrics of the companies you prefer, such as
Price to Equity ratio
Annualised Revenue Growth
Debt to Equity ratio
Return on Equity
For now, you can determine your chosen company's relative value by comparing and contrasting these metrics against other companies within the same sector to ensure you avoid any blatant value traps.
I will go into more precise company valuation techniques in future posts.
Simply going onto the likes of Yahoo Finance and typing in the company name or ticker symbol will provide you with a snapshot of the company and its most recent performance. A good starting point when trying to learn more about a potential future investment.
Pick Your First Stock
It's time to whittle down your watchlist to just one stock. I’m not talking about your life savings here; you can put as little as $10 down.
Take your time and pick a company you are a customer of or that you interact with regularly; Maybe it's an app on your phone that you can't live without or a service that you think more and more people will need in the future.
Your first pick doesn't have to be perfect, but I promise you it will pique your interest in that company and everything about it. This newfound interest may lead to further investments within the company or act as a knowledge base for comparison against other similar businesses going forward.
This is the essence of this 5-day challenge, nobody becomes an expert in a few hours, but we learn by doing. Taking the first step is always the hardest part, but it will function as the catalyst for the rest of your investment journey.
Learning is an active process. We learn by doing.. Only knowledge that is used sticks in your mind.
Fund Your Brokerage Account
At this point, your brokerage account should be approved, which will allow you to take a significant step - funding it.
Depending on your broker and funding method, this may take a day or two, so try and get this done as soon as your brokerage account has been approved.
Once the account has been funded, you will be able to use that money to make your first investment.
Buy Your First Stock
After taking the time to learn about the basics of investing, you are finally ready to buy your first stock. Again, you don’t have to pick the most outstanding stock of all time. This idea of the
perfect investment is where many novice investors get undone. Don’t let analysis paralysis stop you from taking your first venture into the stock market. The plan is to continue to invest for
the long term, so this initial investment is about getting started, not about your pick single-handedly becoming a major contributor to your future wealth.
Congratulations, you’re officially an investor.
Do you have the perfect investment portfolio? No
Are you destined to be a millionaire in the coming days off the back of your $10 investment? Unlikely
Are you closer to your investment goals now than you were at the start? undoubtedly