Every girl's beginners guide to investing

By Hanin Najjar

Investing is a good way to build financial stability and to grow your wealth. The earlier you learn to invest, the more financial potential you will have in the long run. But we know that investing can be a little daunting. If you’ve been thinking of investing, take this as your sign to learn and build a healthy financial future for yourself.

Investing is not so intimidating once you learn the basics of how everything works. Here are a few things you need to know before you start investing.

When should I start investing?

Before you can think about putting your money into an investment, you should have a few things.

Get a steady income

To invest wisely and grow your wealth, you first need to have a job with a steady income, any job with any income as long as you have money coming in and all your expenses are covered.

Pay off credit card debt

Interest on credit cards is really high. Even if you are making money on the stock market, you’re probably losing more to credit card companies. Pay off your credit card debt before you put your money in an investment.

Build an emergency fund

Take some time to save 3-6 months’ worth of expenses and leave them in your bank. Don’t touch this money unless you have an emergency like losing your job, your car breaking down or booking a plane ticket to see a sick loved one. Once you have money for emergencies, you can start investing. You should NOT invest money that you will need to pay bills.

After you have all of these things done, think about how much money you are willing to invest. If you have more responsibilities like kids, you may want to invest less and keep more cash handy for unforeseen expenses. If you’re single you may be able to invest more of your paycheck. Decide how much money you want to put aside money each month to invest.

What are the different types of investments?

Now that you’re ready financially, you should know what kinds of investments there are out there. There are several different types of investments but here are the important ones

Stocks: When investing in stocks, you invest directly into a company on the stock market. This means you own a small part of the company. If it does well, so do you, but if it tanks, you go down with it.
Exchange Trade Funds (ETFs): ETFs are basically a group of companies. So instead of investing in one company, you invest in a group of companies. Often, ETFs are grouped by sector, so you will have an ETF that is filled with energy companies, or tech companies, or health companies. These investments are safer but grow a lot slower than other stocks.
- Note: some ETFs invest in weapons, to check if the ETF you want to invest in has money in weapons trade, check out its score on weaponfreefunds.org.

What kind of investor are you?

There are two different types of investors, the passive investor that puts money into investments and forgets about it, letting it grow over time, and the active investor who pays attention to the news, politics and the economy to make decisions on stocks.

If you are a passive investor, then investing in big companies, ETFs and within a retirement fund may be the best option for you. Investing long term is beneficial because you will not have to worry about recessions and politics. Over time the stock market will grow and so will your investment, but you have to be willing to part with your money for years, maybe even decades.

How do I start investing?

You can start investing by opening a brokerage account with a company like So-Fi and buying stock or cryptocurrency. The stock of each company will have a different price depending on how big the company is and how many stocks it has. A big company will have stocks worth a few thousand dollars which might be out of your price range, but apps like Robin Hood allow you to buy a portion of a stock so you can invest as little as $1.If you invest a little at a time you can eventually buy a full stock in a big company.

How do taxes on stocks work?

The most intimidating part of investing for most people is figuring out the taxes, so here are some easy rules to remember:

You only get taxes on gains.

The only time you have to worry about taxes is after you sell your stock and if you made a gain. If you lost money, or if your money is still in stocks, you don’t have to worry about taxes.

Short term Vs. long term

How long you keep your money in a stock determines how much you have to pay in taxes once you sell it. If you sell your stock less than a year after buying it, you pay higher taxes on it than if you keep it for a year or longer.

Taxes on short-term investment depends on your income tax bracket. If you make $40k you will be taxed less on your gains than if you made $65k. Find out what your tax bracket is to see how much you will have to pay in taxes.

Long term investments are also taxed by tax bracket but you can only fall into three categories: 0%, 15%, and 20%.

How to actually file taxes on stocks

Every year, your brokerage account, the account where you buy and sell stocks, will generate a 1099 form that will show you exactly what you bought and sold that year. You can then input that information into your tax software, or give it to an accountant.

Is there a way to avoid taxes on stock market gains?

Pro tip: if you invest your money through a retirement account called a Roth IRA, you can pull out your gains tax free after you retire. But that means your money will be in there for a pretty long time with some exceptions.

Start investing

Now you know enough to get started planning your financial future, but here’s one more piece of information. When you have money sitting in your bank, it will slowly lose its value because of inflation. Although the stock market is not guaranteed, you have a chance of growing your money instead of letting it sit. The earlier you start to learn about investing, the better financial decisions you can make in the long term.

If you’re ready to get started, we recommend opening brokerage accounts with So-fi Invest and Robin Hood.

Header photo by Liza Summer via Pexels

*This information is not financial advice and is meant to provide general information for educational purposes. All investments involve risk and you should conduct your own research to make the best decisions for yourself.

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