So you've accepted that taking control of your finances is something that you need to do. Now, where to begin...
Before you start taking steps to bring your finances under your control, you need to know what your starting point is. What does your personal balance sheet look like? It's a simple few steps to find out. First, record the approximate value of all of your assets. Next, subtract the approximate value of all of your liabilities. The number you are left with might be a positive or a negative number. Either way, that is your starting point. That is your approximate net worth. Don't worry, wherever it is, we all need to start somewhere.
If the number is negative, most likely your best investments will be in eliminating consumer debt and strengthening your balance sheet before attempting to speculate in the stock market. We are assuming if you've made it this far, your net worth is either positive, or your debt levels are at a manageable level that allows you to look into investing for your future. The subject of how to deal with debt is a separate topic, so we will focus for now on how to get started investing in the public markets.
For online trading, you will want an account with a discount broker. In fact, discount brokers are now commission free for most stock purchases. This is a major savings for active traders. A quick google search will reveal a plethora of top rated firms like Etrade, TdAmertrade, and TastyWorks. There are several good options, with some offering banking services, and others offering brokerage services only. Take the time to read comparisons and find a firm that provides the services that you are looking for.
Next, you'll need some money. You know the old saying, it takes money to make money. While that might be true for trading, it costs nothing for you to practice with play money. That's right, several of the modern brokerages will allow you to open an account, fund it with imaginary money, and then begin to trade just as if it were real. By taking advantage of this feature, you will likely save a small fortune in little mistakes that you will inevitably make simply because you haven't traded before. Paper trading until you get the hang of it costs nothing, and increases the likelihood of success when you do fund the account and transition to live trading. It might also get you even more excited about the possibilities that lie ahead when you dive in with real money.
You've done your homework, and found just the right broker. What's next? It's time to fund that account. Most brokerages will allow you to open an account for free, and fund it with any amount to get started. While we encourage everyone to start, no matter how small, paying for investment advice is something that might not make sense for everyone. We have had many subscribers tell us that although they don't much free cash to trade with now, but they are expecting to have more in their immediate future, and want to educate themselves prior to putting that money to work. That makes perfect sense, and we welcome them with open arms.
But trading is a game of numbers, and it takes money to make money. In the real world, we never know what our annual return will be in the future, but for simple math, let's assume a 10% return. That means that somebody with a $10,000 account could potentially pay for a year's worth of the education that we provide and still have some money to show for their effort. For those seeking financial education, that's not a bad proposition at all. But once you start dipping below $10,000, it becomes more difficult to cover the expenses of your new investment business from the profits of the business. For this reason, we think of $10,000 as our recommended minimum starting amount, and $20,000+ as a solid full immersion level.
We have used Tastyworks as our broker of choice for years now. They offer up all the services that are useful to us as traders. Trading stocks is done quickly and easily in just a couple of clicks. They have a robust options trading platform, which is something that those who would like to trade more aggressively with our Basecamp group find very useful. Segregation of different accounts and IRAs is fairly simple. And customer service has always been top notch. We've also found that while Robinhood and Fidelity are constantly going down during times of high market volatility, we haven't had that issue with Tastyworks.
Opening an account is easy enough. If you have less than $25,000 to start with, consider a cash account because they aren't subject to pattern day trader rules. For accounts over $25,000, you want to open a margin brokerage account, even though we only trade our cash available in our accounts. You also want to tell them your experience with options so that you can be approved, at a minimum, for Class 1 options trading. Other than that it's a pretty straightforward financial questionnaire.
You can sign up for Tastyworks here with our affiliate link.
At Wanderer, we demonstrate different trading techniques for different lifestyles. As much as we like to keep things simple, there is no one correct way to manage your money that is correct for everybody. A twenty-year-old with a good income might not care about dividends, while a sixty-year-old retiree is no longer looking at the long game when it comes to their investments. So, it stands to reason that their investment strategies will need to be very different.
There are different ways to harvest profits from your savings—capital gains, interest, and dividends.
Capital gains - This is the buy low, sell high theory. When a company is growing, they tend to plow their profits into more growth. That leaves nothing left over for dividends. If you already have an adequate income stream, you might not care. In fact, you might prefer that it doesn't. If they pay you in dividends, you have to pay taxes on that, AND find something else to do with the money. If THEY re-invest it instead, you might get a better return, and not have a tax bill until you sell it.
Interest - Business growth consumes capital. Businesses often fund growth by selling bonds. That is, they borrow money. Capital that you have in the form of savings, businesses need and are willing to pay you interest for. This is great for retirees who need a steady income source more so than a capital gain.
Dividends - Eventually, a business matures and begins to spin off more capital than it needs. That's where dividends come in. At Wanderer, we have a portfolio that specifically focuses on dividends. Dividends are a great way to supplement an income stream.
At Wanderer Financial we offer model portfolios to fit anyone's needs. We have our trading portfolio which seeks to actively manage positions via swing trades that typically last about two weeks. We also offer a buy-and-hold portfolio which seeks longer-term capital gains. And we offer a dividend account which seeks to provide 6-8% dividend income. In addition to all of these offerings we offer our daily Basecamp group chat where those that would like to trade more actively can learn to trade options, and can find even more great active trade setups.
It's not as hard as it seems. If you've ordered anything online before, you can handle an online stock purchase. In fact, we walk you through the process step-by-step in this easy tutorial. While placing the first trade might feel a bit daunting, it quickly becomes second nature. Each brokerage has their own order page, so yours may vary slightly from the examples shown in the tutorial, but the basics are the same, and if you have any questions, we are available in Basecamp.
You don't have to! Our online community is full of helpful folks who would be happy to answer questions you might have. Pat and Lorin also moderate Basecamp on a daily basis and answer questions. With 50 years of combined experience, there aren't too many questions about trading that they haven't already encountered.
Join us in Basecamp and you'll be surrounded by a great group filled with every different experience level, there to learn, and grow their portfolio. It's also just a fun spot to hang out with like-minded, adventurous, fun people.
If you haven't done so already, it's a great time to subscribe. Whatever your dreams for a Wandering life include, the shortest path to finding them starts right here. You don't have to do it the hard way by learning on your own and making costly mistakes. The financial education and professional trading strategies alone are worth the cost of an annual subscription. But when you add in the guidance and advice shared by hundreds of experienced Wanderers who are already living a SELF-dependent, pretired life–now that is truly priceless.
The world is waiting. Join us and hundreds of successful Wanderers and subscribe today.