In an effort to demystify stock market investing, Taylor Whelan, Chief Investment Officer of Whelan Financial, emphasizes that many common perceptions about the stock market are misleading. Contrary to the belief that investing resembles gambling, Whelan asserts that a more strategic approach is essential. “If you invest in a conservative and diversified way, the odds are in your favor,” he explains, highlighting the importance of a sound investment strategy.
Whelan suggests that rather than relying on individual stocks, investors can opt for exchange-traded funds (ETFs) or mutual funds, which pool money across a broad spectrum of companies, effectively spreading the risk. This diversified approach protects investors from the pitfalls of depending on the performance of a single company. “You can go out and buy something that’s an ETF or a mutual fund that spreads your dollar over many, many different companies,” he states.
Another key point Whelan raises is the concept of fractional shares, which allow investors to purchase portions of expensive ETFs with relatively small amounts of money. He reassures investors that as long as they don’t sell their investments during market downturns, they are not incurring real losses. “In a well-diversified investment, if the value goes down, you still have the same amount of shares in the mutual fund or ETF,” he explains, emphasizing that market fluctuations do not affect the number of shares owned.
For those hesitant to enter the investing world due to limited funds, Whelan notes that starting small is entirely feasible. With the convenience of modern technology, individuals can open online accounts in just a few minutes and begin investing with as little as one dollar. He recommends beginner-friendly platforms like Robinhood, Fidelity, and Charles Schwab, which have made the process more accessible.
Whelan also points out apps that facilitate automatic investing by rounding up purchases to the nearest dollar and allocating the change to an investment fund. This method helps new investors cultivate good habits and become more aware of their financial futures.
Market volatility, often viewed with trepidation, can present opportunities for savvy investors. Whelan introduces the strategy of “buying the dip,” suggesting that when the market declines, it might be an ideal time to invest additional cash. He also addresses the misconception surrounding cash holding, stating that while many believe cash is king, inflation can erode the value of money held in savings. Alternatives like high-yield savings accounts or certificates of deposit (CDs) may offer better returns.
As financial literacy becomes increasingly important, Whelan encourages individuals to consult with financial advisors to find platforms and strategies that align with their personal values and financial goals. With the right approach and tools, managing investment risk becomes a manageable and potentially rewarding endeavor.
