Beginner Investors Should Start By Buying SPY Or VTI

For most people exploring the stock market for the first time, it is probably best that they steer clear of individual stocks. It takes time and effort to pick the companies that you think will do well in future years. In addition to that, it takes more time to monitor how your stock picks are doing. You will need to periodically evaluate whether things have gotten worse or better for the companies you choose and figure out whether you should continue to hold or perhaps sell.

In other words, learning how to successfully invest your money in the stock market by buying and selling individual stocks takes commitment and is something that is learned over years, not weeks or months.

Is There A Better Way?

I suggest a better, safer, and easier way for beginners to get started: just invest in the whole market which you can do by buying either the SPY or VTI exchange traded funds (ETF). 

ETF's are traded just like individual stocks: you can buy or sell any amount of shares at any time the market is open. They cost the same to trade as a stock (there are no hidden fees like mutual funds) and give you exposure to many stocks all under one ticker symbol.

1) SPY closely tracks the S&P 500 index which is many/most of the big companies in the United States. In other words, when the market goes down so does SPY. And similarly, when the market goes up, so does SPY.

2) VTI is another ETF that closely mirrors the market. It trades just like a stock and is super easy to buy and sell.

ETF's Are Best For Beginners

These are just a couple of the ETF's you can find that mirror the market or mirror part of the market. ETF's have become so popular that there are many to choose from and you can find a lot more with just a little research. But the important thing to understand is that you get exposure to the stock market without having to fret over what individual stocks to buy. You also get instant diversity that you don't get when you buy only individual stocks.

Beginners have a lot to learn when entering the world of stocks and can often get intimidated. This leads to many potential investors quitting before they ever get started. By buying a market tracking ETF, you get a simple and trustworthy way to put your money to work in the stock market without getting sidetracked and overwhelmed. Oh, by the way, Warren Buffett (legendary investor) also recommends ETF's over individual stocks for most investors.

Trump Will Be A Disaster For Stocks! Wait, Let Me Change My Mind

To most everyone's surprise Donald Trump won the election and will be the next president of the United States. The stock market clearly wanted Hillary Clinton to win as you can find an endless number of articles online detailing why Trump would/will be a disaster for the markets.

During the most tense hours of election night, when it was becoming clear that Trump had the upper hand and would likely win, the stock futures were down a solid 5%. That meant that the next morning every stock investor would likely wake up to a portfolio that was significantly smaller than when they went to bed.

But sometime during the rest of the night and early morning, investors started to rethink things and decided that maybe things weren't really as bad as first imagined. Maybe, just maybe, a Trump presidency might NOT be the end of the world after all.

What happened to change people's minds?

1) I think first of all, people started to remember Brexit which happened less than five months ago. While the stock market did dive deeply on that news, it only took a couple of days for things to shoot back up and normalize. Since then, the Brexit fear mongering news has completely died down and is hardly in our conscious anymore. There still might be some tough times ahead for the UK as things unwind and the fallout from the decision to break away becomes more clear but, so far at least, Brexit has clearly NOT been the disaster that so many people predicted.

2) Investors also began to realize that Trump is a businessman, is generally pro-business, and may in fact enact a lot of changes that will actually be good for business. We've tried eight years of Obama and that hasn't turned out so well economically for much of middle class America. Investors probably started to understand that this is the first time in a long while that we are going to have a President that understands business and isn't a career politician.

3) Finally, while the market is forward looking, nothing Trump does will happen right away. It will be two months before he is in office and probably months after that before any significant changes are made. If they ever are made. It is likely that Candidate Trump was more harsh in his rhetoric than his actual policies will end up being. After all, during a campaign, politicians say anything to get elected but once in office they calm down and rarely follow through on their most divisive plans. This will probably be the case with President Trump as well.

The stock market is a crazy place where emotions can get the best of you very quickly. Its best to never trade on fear or panic and this time it seems investors got their emotions from election night under control the next day. That was a disappointment for me because I was hoping to do some buying on the morning of November 9th but stocks never went on sale like I hoped they would.