"The journey of a thousand miles begins with a single step." - Chinese proverb attributed to philosopher Laozi
With all the COVID-19 whipsawing we're experiencing in the U.S. economy - and the uncertainty that's created for folks like you and me - Money Map Press is seeing more direct inquiries about stocks than at any time since the Great Financial Crisis of 2008 to 2009.
And one of the most intriguing queries we're seeing is this one: "I have $2,000. I want to invest it in stocks. But I'd sure be grateful for some guidance on which stocks to buy and what 'strategy' to employ."
Let me tell you folks: I love this question.
And I respect the heck out of those who posed it, or who were thinking along those lines, for a few reasons...
For one, you're ignoring the near-term "noise" and are focusing on the long term.
Second, you're taking action - and taking control of your own financial destiny - which is always one heck of a lot better than just sitting back and letting stuff "happen to you."
And, finally, it can be a difference-maker. That two grand is merely the first step. But it shows that you're serious about changing your future. It puts "skin in the game." It forces you to pay attention. And you'll be stunned at how much you learn.
It takes courage to act, to make tough decisions, to move forward.
And by posing this question, you're doing just that.
Just as a long journey can start with a single step, the journey toward a secure financial future can begin with a single investment - even one as seemingly small as $2,000.
And I'm going to start by sharing a personal story that proves the value of a "mere" $2,000 investment. I'll even offer some stock recommendations that will help you take that first step...[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
As I've told my Private Briefing subscribers, my interest in stocks began with the Crash of '87. I became an avid investor and found fulfilling success with a new professional path that focused on economics, finance, and investing.
I was 25 years old.
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I wanted my son Joey to have those same advantages - but with the benefit of a much-earlier head start. So two years ago, I sat down with my 11-year-old son, Joey, and told him we were going to start picking some stocks for him to invest in.
I'd set aside some cash to make this possible. And just by happenstance, the "seed money" totaled $2,000 - the same amount of investment capital that you folks have been asking for advice about.
And with electronic trading - and investing apps like Robinhood - it's no longer cost-prohibitive to buy "micro blocks" of individual stock.
And I like the strategy of buying individual stocks vs. exchange-traded funds (ETFs) or mutual funds because of the real-world education you'll get from following the shares of real companies.
With Joey, the results have been dramatic. Not only did he choose well, but he's also reaped some very nice returns. More important is the "situational awareness" his investments seem to have spawned. While he's not talking about P/E ratios, or short-interest or earnings forecasts, Joey is noticing the headlines "his" companies are making. Since I've been working from home during the coronavirus pandemic, my son has actually come to me each day to ask what I'm writing about for my Private Briefing subscribers.
If you're starting with $2,000, there are plenty of ways to organize your investing.
But there's one strategy I like a great deal.
I call it the "invest in what you know" strategy - an approach championed by former Fidelity fund manager and best-selling author Peter Lynch. The approach is simple: You buy stock in companies whose products, services, and offerings are those that you use.
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This is exactly what I did with Joey. By sitting down with him, talking it over, and really listening to what he said was important to him, we were able to zero in on the companies who make, market, and service the things he really likes.
Here's an "invest in what you know" stocks list, including some that Joey picked and some additional ones we've all gotten to know as part of the COVID-19 pandemic:
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At recent trading prices, buying a single share of each stock would give you a "portfolio" that costs you $1,984 - without factoring in any transaction costs.
So we're talking just a few bucks shy of our $2,000 threshold.
An investment of "two grand" may seem like a small first step.
But don't minimize its importance.
You will be taking that "first step" on a thousand-mile journey to a better financial future.
Even a wealthy one.
You'll watch yourself grow smarter and shrewder. You'll want to add to your existing holdings. And you'll find other companies whose stories intrigue you.
That's the advantage of investing your $2,000 grubstake in individual stocks instead of in a single mutual fund or ETF: Because you'll actually follow the companies (as Joey has been), your cash will serve as a type of "tuition." By that I mean your outlay will focus you and educate you about companies, stocks, and the financial markets - even as it grows in size.
From there, look to "Accumulate" your way forward.
This is one of favorite strategies - and is perfectly tailored to a "start slow/ keep/ building/ invest for the long haul" approach we're talking about here.
After taking these initial "foundational" stakes, look to add to your holdings on pullbacks or as you get more cash. You can even consider some kind of "automated" investments, so you're forcing yourself to keep investing - at regular, scheduled intervals.
Most important of all: Focus on the long haul.
If stocks fall - which they will at some point (whether it's next week, next month, or next year) - view it as an opportunity, and add to your stake.
Do this, and your little fund will turn into a large one more quickly that you can imagine.
Down the road, when you're financially secure - and quite possibly even wealthy - you'll look back and remember that it all started right here.
I'll see you folks back here real soon.
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About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning at Money Map Press.