I Made This Mistake When Opening A Brokerage Account – And It Cost Me Thousands

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Playing it safe with your investments could hurt you in the long run.


Key points

  • I started investing in a brokerage account in my late twenties.
  • My initial fear of buying stocks has since cost me thousands of dollars in lost earnings.
  • Starting small can help you get used to investing in stocks.

It took me until my late twenties to open a brokerage account and start investing in it. The reason? My initial goals after college were to pay off college debt and build a strong emergency fund. From there, I wanted to start funding a dedicated retirement plan.

Once I earned enough to make regular contributions to my retirement plan and an outside brokerage account, I opened this one — namely, to give me more flexibility with my money. Dedicated retirement plans like IRAs and 401(k)s are great because they come with tax advantages. But they also require you to leave your money locked up until age 59.5.

With a regular brokerage account, you can access your money whenever you want. I wanted that option, so I started investing outside of my 401(k).

But the investments I initially chose to load weren’t the best in hindsight. And if I had taken a different approach, I would probably have many more thousands of dollars to my name today.

The danger of playing it safe with investments

When I first opened a brokerage account, I invested my money in bonds. The reason? I was afraid to buy stocks.

Stocks are known to be much more volatile than bonds, and I didn’t like the idea of ​​potentially losing money. But while bonds can be safer, they tend to offer much lower returns than stocks. And so, by sticking to bonds only for the first two years I had this brokerage account, I resigned myself to lower returns — and lost thousands of dollars as a result.

Luckily, I was able to overcome my fear of stocks and became interested in them around the age of 30. As such, I have not submitted to also many years of lower returns in my brokerage account. But still, if I had stocked up on stocks from the start, I would potentially have a lot more money than I have today.

A Good Approach to Buying Stocks When You’re Scared

The thought of investing in stocks can be daunting when you’re just starting out. If you’re nervous about buying stocks, start slow. And also, start small – invest $300 and see how it goes. Then invest $300 more. And so on.

Additionally, most brokerage accounts today offer the option of investing in fractional shares. This means that if you don’t want to buy a whole share of a particular company’s stock, you can buy a share of stock instead. So if there’s a company whose stock is trading at $1,000 a share and you’re nervous about spending that much money on a single stock, you can buy a fifth of a stock at instead if it’s more in your comfort zone.

Split investing was not an option when I started. If that had been the case, I might have been more inclined to try my luck with certain companies whose higher stock prices scared me away.

Another option to consider is buying a broad market AND For exchange-traded funds. This way, you are not betting on specific companies to make money, but rather on the stock market as a whole.

It’s natural to be nervous about buying stocks. And it’s also good to put some of your money in bonds when you were younger. But don’t make the mistake of avoiding stocks altogether. Although equities carry risk, by staying away from them you run another risk: limiting yourself to lower returns that don’t meet your financial goals.

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