As a finance journalist, I’ve written about the value of investing in shares more times than I can count - but I’ve never actually done it.
In fact, I can tell you why investing in shares for your children when they are born is a no-brainer, and why you should think about investing in an exchange-traded fund rather than let your savings sit in a bank account in the current low interest rate environment.
But what I couldn’t tell you was how the process of investing actually occurs. What are the first steps? What does it feel like to splash cash into the internet abyss?
Also read: How to buy your first shares
Now, I can.
Just yesterday, I invested AU$1,000 for the first time, and while I’m no expert, sharing my experience might encourage you to do the same.
Where I invested
While I have a general idea of how shares work, I probably can’t allocate my money to individual shares confidently.
There are plenty of options for beginners, like CMC Markets. But, if you’re already with a major bank, you could contact them to see what brokerage service they can provide. For example, Commonwealth Bank of Australia has its CommSec investment arm.
Instead, I chose to invest on the eToro platform.
eToro is an online social trading multi-asset brokerage company. But the real hook was the ‘social trading’ aspect.
Basically, it means you can invest your money in exactly the same way that other, more experienced, investors who are investing on eToro do.
You can allocate portions of your money to different investors too, so you don’t necessarily need to follow one strategy.
The site also makes it fairly simple for you to decide who to invest with: there’s an ‘editor’s choice’ tier of investors who have thousands of followers already.
These traders are obligated to show the returns they’ve made in the last 12 months, and their profile pages will tell you their strategy, and their predictions for 2020.
I decided to copy Wesl3y, or Wesley Warren Nolte, a trader who made 33 per cent returns in the last 12 months, and whose 2020 goal was to achieve 40 to 60 per cent returns.
He invests heavily in tech stocks, and in a blog post to Medium, explained why.
“I mostly trade US tech stocks - I know these companies very well, working with their technology, and generally just interested and curious about them,” he wrote.
How to get on the site
While eToro definitely has its expert traders, you don’t need to be one to sign up.
However, you will be asked to complete a 10 question quiz of basic trading questions before you sign up.
Doing some light reading on sites like Investopedia will see you easily pass the test. You also have three attempts to answer the same set of questions, so whatever you weren’t sure about the first time, you can Google the next.
Once you pass the test, you’ll have to provide your tax file number and some identification details. Then, you will be able to deposit funds.
Be aware that eToro is a US site, so you are investing in US dollars.
You should familiarise yourself with the eToro site, and read the portfolio strategy of the investor you are copying to understand it.
Then, you wait. Trading is a long game, and it’s best to set and forget.
If you’re not happy with your current stocks, you can always sell them off and choose to invest with a different investor, or - if you feel confident to do so - pick your own.
Next, read: How to buy your first shares.
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