First Time Investor Explains How to Get Started: Learning how to invest can be a daunting process. In this video and in the article below, Retirement Daily Assistant Editor Michael LaRocca is the “First Time Investor Explains How to Get Started” and goes through the process on his own to show you the ropes with Haley Ellis, CFP. They discuss risk tolerance and Michael’s capacity for risk in his investments.

Article: A First-Time Investor’s Journey Through the World of Risk

Learning how to invest can be a daunting process. Assistant Editor Michael LaRocca goes through the process on his own to show you the ropes.

By Michael Larocca

First Time Investor Explains How to Get Started: Throughout most of my life, I liked to compare my understanding of investing to my understanding of how lines work in hockey. The more someone tried to explain it to me, the less I understood.Luckily, this summer, I have finally learned how both of those concepts work. Except, for now, let’s focus on investing because that’s what’s really relevant here, right?

My Understanding of Money

As I grew up and entered my teenage years, I developed a mindset that told me, “If you want more money, work more.” So I did. With assistance from the Wells Fargo checking account my grandmother helped me open when I was 13 years old, I began saving as much money as possible. I got my first job as a youth flag football referee when I was 14, then I got a real job at my local bagel shop when I was 16, where I still work to this day as a plucky 20-year-old. I always told myself that if I spend less than I make, my account should grow in perpetuity — or at least until I stop working. That day came sooner than I expected. When I left to attend college at Quinnipiac University, I suddenly no longer had the source of income that kept me financially comfortable while at home. And, yes, the consistent ordering from DoorDash took a toll on my wallet. While at school, I was told about the world of investing, but not productively. I understood that it can be a way to make money without necessarily working for it, but no one ever gave me a concise explanation as to how it worked, nor did I honestly seek one out. I’m sure that I am not alone in the belief that the word “investing” has become too synonymous with the idea of putting money into the stock market. Up until these past few months, that was all I believed investing to be. However, once I began my internship with Retirement Daily in June 2023, I learned that stocks are only a piece of the puzzle — and they don’t have to be the first one you pick up.

My Investment Journey

Several weeks into my internship, during my weekly meeting with our editor, Robert Powell, I was told that it is tradition for the interns to receive a $250 bonus they are meant to invest in anything they so choose. I was a little overwhelmed. I already learned that there are countless options to invest in, but that was what got me. How am I supposed to choose? As a younger person, I realize that now is the time in life to take risks and go big, but I’ve never been that kind of person. Throughout the whole process, I learned about my risk tolerance and my capacity for risk in my investments. I realize that my tolerance is not very high, as I did not want to come to terms with the idea of losing the money that I was given. On the other hand, my capacity for risk was also very high, because I don’t have any consistent bills I need to pay. “(Risk tolerance and capacity are) the two pieces that you have to really consider,” said Eric Roberge CFP, founder of Beyond Your Hammock. “How do I feel about investing? Am I going to sleep at night if I invest a certain way? … Do I have to I have extra money outside of the investment that I can use for daily functioning? Or is this the only money that I have? And if it’s the latter, you really shouldn’t be investing it or shouldn’t be doing something at a very risky level.” My goal for this project was to put my money into something safe, something that can keep my principal investment secure, plus a little extra. Time also isn’t of the essence for me since these were funds that I had the chance to play around with at my own discretion. No harm, no foul. There was nothing stopping me (besides the fact I am not of legal gambling age) from taking all this money and putting down a futures bet on the New Jersey Devils winning the Stanley Cup next year to possibly win $3750 total. However, that is not the kind of person I am, and I figure that this assignment is a privilege, and putting all the money into something that I see as equivalent to flushing it all down the toilet is being ungrateful. It all goes back to how I believe that my hard-earned money shouldn’t be at risk of disappearing in an instant. I could have also tried finding a stock that pays dividends, like AT&T for example. However, even with higher dividend yields, over the course of a year, I’d only make a few more dollars on that investment compared to what I eventually chose. Also, if I learned anything from my time at Retirement Daily, it is that investing in only one stock is very rarely a good idea. “Obviously, there are some investments that are riskier than others,” said Haley Ellis, CFP, a financial planner with Cooke Capital. “You can diversify, which takes away some of that risk. But the stock market is really probably what you want to look at when you’re thinking of longer-term goals that you have.” As a result, I figured that playing it safe could be a good option, especially for my first time ever investing. I initially wanted to explore mutual funds, which are a pool of several different stocks bundled together in a way that can keep investments safe. I heard in the past that they can be pretty secure investments, which was good in my book. They’d also be a good way to create a diverse portfolio immediately rather than building it piece by piece. As I pondered those thoughts, I started to hear more and more about one type of investment. That investment is the certificate of deposit or CD. A CD is where you deposit money into an account for a set period of time with the guarantee that you will get that money back at the end, including any interest it accrued over that time. To help me make this decision, I went to the person I trust the most, my father. I asked him about both mutual funds and CDs. He told me that with the amount of money I planned to invest, a mutual fund might not do much for me, but a CD can be an easy way for me to make money back with little to no risk. So I took his word for it. I began my search for a CD to invest in by looking at what was available through my current bank, Wells Fargo. Once there, I was disappointed to see that they required a $2,500 minimum deposit, an amount of money I was not comfortable foregoing for the amount of time it asks. As a result, I began searching for CD accounts that had no minimum deposit. I ended up finding an article from GOBankingRates which detailed several banks that had exactly what I was looking for. My eventual choice was to go with Barclays Bank, which offered a no minimum deposit 12-month CD at a 5% APY. It seemed to be the best rate I could find for the amount of time, so I decided to invest the $250 given to me along with another $50 of my own money into this account. While this may have been a low-risk investment, it was the decision I chose to make for who I am as a person right now. “You don’t have to do anything, right? You don’t have to invest aggressively. You don’t have to invest conservatively. You just have to understand what the trade-offs are,” Roberge said. “If you’re going to rely on 1% to 2% returns on your money, what you’re going to have to do most likely, is save more money. So I think that’s the biggest trade-off, saving more and getting less returns.” Now, by this time next year, the $300 I deposited will come back to me as $315. While a modest yield, I am proud to say that I invested in something for the first time. I have the confidence now to go back and find more ways to invest my money as I get older, which is exciting.

Thanks are in order to Powell and Retirement Daily for giving me the opportunity to explore what options are out there. I certainly would not have gone searching for them by myself otherwise. Investing makes a little more sense to me now, and I am extremely grateful.

If you enjoyed watching First Time Investor Explains How to Get Started, be sure to subscribe to FinStream on Roku, YouTube and other TV platforms. Watch more Haley Ellis videos on finStream TV at this link: https://www.finstream.tv/featured/haley-tolitsky/