Welcome back, fellow parent

This week I’m covering a sure-fire way to grow your wallet: investing.

While there are many ways to invest in the future, let's start with the good ole' stock market.

The TL;DR

Don't have 5 minutes to read the entire newsletter today? No worries, here are the key takeaways from today’s newsletter:

• Even if you only have a few dollars to invest, check out fractional shares at companies such as Robinhood and Fidelity.

• Define your goals and determine your risk tolerance before investing, it’ll help inform your strategy.

• If you aren’t sure of bullet point #2 above, I’d start with a long term strategy and adjust as needed.

• Today’s newsletter covers stocks, ETFs, Mutual Funds, Index Funds, Bonds, and REITs.

• 3 Quick Tips for Investing: Stay consistent, diversify, and stay informed.

A Quick Reco

While my writings cover the different ways to invest your money, I typically won’t provide recommendations on specific stocks to consider purchasing.

If that’s something you’re looking for, check out Bullseye Trades. You’ll get daily emails on what’s hot or not in the stock market.

Monday was a pretty great example of the value of this newsletter. Jeff Bishop and team’s Bullseye Trade of the week was ELF options, which soared ~160% 10 minutes after the markets opened.

Subscribe below to check out their free newsletter. No purchase necessary and you can always unsubscribe later if it isn’t for you.

Why Invest in the Stock Market?

In his 93 years on Earth, Warren Buffett (aka the Oracle of Omaha) has laid down some serious knowledge for the world, but this quote is one of my favorites:

It's a great example of the value of long-term thinking and planning. Even though the person who planted the tree likely won't reap the benefits of the shade, they created a foundation for the future generation.

The same can be said about investing in the stock market. You're putting in the work today so you (and your children) can reap the benefits in the future.

While many make the stock market out to be this super nebulous thing, it's fairly simple and doesn't take much to start investing.

Companies such as Robinhood now offer opportunities to invest in fractional shares, meaning you can purchase a portion of a stock with only a few dollars.

Stock works in your favor with compounding interest. A quick example: if you invest $1k today and it grows at an annual rate of 7%, it could be worth over $8k in 30 years. Check out Nerdwallet's Compound Interest Calculator to play around with the numbers.

While riskier, stocks have historically outperformed other financial products such as savings accounts and bonds. Oh, and they typically outpace inflation as well.

Before Starting to Invest

Take stock (pun landed? 💪) of two things before investing this year.

#1: Define Your Goals

Take a beat and reflect, why do you want to invest? What are your goals? Maybe you're saving for a new home, your kids' college, or retirement. Your investment strategy should match your goals. If you're unsure of your goals, take a more long-term strategy until you have something in mind.

Another way to think about this - how long can you leave your money invested? Typically, some of the best investments take the most time. But you need to feed your family, so strike a balance.

#2: Assess Your Risk Tolerance

Okay, serious question. What's your comfort level with taking risks? Investing always carries a risk and typically the higher risk the higher the reward. Sounds a bit like gambling doesn't it?

There's a reason why I don't partake in any of the meme-stock craziness that you'll see in the news. It's highly speculative and their stock charts look like a roller coaster. Keep in mind, while you'll see headlines about the winners, for every winner there are countless losers out there holding the bill.

I keep the bulk of my investments in companies which I a) understand their business model and b) can hold for the long term to avoid any market fluctuations.

Knowing your level of risk tolerance will help you determine which avenue to take.

Types of Investment Products

Understanding the different products you can invest in will help you make smarter decisions. Here are some key options:

#1: Individual Stocks

Buying shares of a company. There's a high potential for returns but also a much higher risk as you're putting your eggs in one basket. A great example is Carvana. If you bought during its peak in 2021, you're likely still down about $250 per share. On the flip side, if you bought Carvana a year ago, you may be up over 550%.

#2: ETFs (Exchange-Traded Funds)

ETFs are a great way to diversify your investment. Each ETF can be made up of hundreds of companies from various industries, meaning you can typically weather market downturns a bit better. You may see slower growth here, but slow and steady wins the race. The S&P 500 has an average annual rate of return of ~10% from 1957 through 2023.

#3: Mutual Funds

These pools of funds are managed closely by professionals and offer access to a basket of stocks (similar to ETFs). One downside is that they usually carry higher fees. There's a lot of discussion around the future of mutual funds, especially with the rise of AI.

#4: Index Funds

Again, similar to ETFs where you get access to a large swath of stocks with every purchase, but index funds differ as they track a specific index (ex. S&P 500). They're also extremely cost-effective and carry some of the lowest fees.

#5: Bonds

I'm not a huge bond investor but think it's important to call these out as you'll especially see these in Target Date Funds (the closer you are to retirement the larger percentage is dedicated to bonds). Bonds are essentially debt securities that pay holders interest over time. Usually a lower return than investing in stocks, but considered lower risk.

#6: REITs (Real Estate Investment Trusts)

REITs have grown in popularity the past few years, especially as people turn to invest in more tangible assets. Essentially a REIT allows you to invest in real estate without having to purchase actual property.

Two pros. First, is you diversity by investing in real estate which is sometimes considered more stable. Second, REITs typically offer a decently high dividend.

3 Quick Tips

If nothing else, here are a few quick takeaways from today’s newsletter on investing:

• Stay Consistent: Regular investments, even small ones, can add up over time.

• Diversify: Spread your investments across different sectors.

• Stay Informed: Keep learning and stay updated on market trends.

By investing smartly, you’re not just securing your family’s future but also setting an example for your children on financial responsibility.

Check out Bullseye Trades

Dropping a second link for Bullseye Trades to save you from having to scroll to the top of today’s newsletter. 🙂 

If you’re interested in daily stock tips, check out Bullseye Trades. Jeff Bishop and team are crazy dedicated to making money in the stock market and are offering up their newsletter free of charge.

Subscribe below and check it out. Let me know what you think.

Question of the Week 🤔

If you have any questions about getting started or investing in general, hit reply, and let's chat.

Money News 🤑

1. The GameStop stock roller coast is at it again. If you haven’t heard, the Roaring Kitty (real name = Keith Gill) is making headlines again as he started posting online about Gamestop for the first time in three years. This time he made waves by showing his ~$116M bet on the stock. It’s going to be an interesting week.

2. We all know kids are expensive, but did you know that the average cost of childcare is on the rise? Not surprising, I know. According to Care, it costs $321 on average per week for childcare, up 13% versus 2022. Interestingly, the US Department of Health and Human Services issued a recommendation that childcare shouldn’t take up more than 7% of annual income. At $321 per week, it’s accounting for ~24% of median annual income.

3. Demand for travel has been decreasing over the past 12-18 months, meaning it’s finally getting a bit cheaper to travel. For example, the price to fly from flights originating from the US dropped ~6% from April 2023 to April 2024.

Thank You for Reading

Thanks again for reading. Drop me a note with what’s on your mind, I’m here to help.

Talk soon,

The Dollar Dad

P.S. If you’re considering starting a newsletter or blog this year, I’d highly recommend Beehiiv (use my link for 20% off any paid plan for 3 months). Drop me a note if you need help getting started or growing your business.

P.S.S. As a heads up, the above link for Beehiiv is an affiliate link. If you make a purchase using the above link, I’ll receive a commission at no extra cost to you.