A couple of weeks ago I received a text from a family friend. He’s a college student, and he was reaching out because he had a few questions for me. He wanted to learn more about personal finance and smart investing choices for his future.

Since my oldest daughter is turning 18 soon, I’m getting a lot of these questions from her friends. It seems that they think I “know a lot about this stuff”, so they are interested in learning from me.

The questions I commonly get are:

  • Can you give me some advice on what books to read?
  • What steps can I take to educate myself on how to make my money grow?
  • What do you recommend I start doing to learn more about stocks, investing, and how to make money grow?
  • I have some money I’ve saved up from summer jobs and it’s just sitting in savings earning virtually nothing. What can I do to make it grow?
  • I’m thinking about putting my money in an aggressive mutual fund during college so it will grow into something I can use after I graduate.
  • What would you recommend I do with my savings?

Do you see the theme? These are actual questions and the common theme is:

How can I learn how to make money grow?

Well, this is certainly a loaded question! As a financial advisor I know it’s not one that’s easily answered over a text message. The last thing I want is to be misunderstood in a way that leads this young new investor down the wrong path. I need to understand more about their situation, their goals, and their investing time horizon.

So, I invited my friend to meet me and here are five things I told him…

Steps to Learn How to Make Money Grow

#1 – Understand what type of investor you want to be.

The very first question you need to ask yourself is…

Do you want to be a “hands-on” investor or a “hands-off” investor?

There’s a big difference in the path you should take depending on your answer. I have found that some people who reach out to me with these questions are just looking for a place to invest some money where it will grow without a lot of effort or without a detailed understanding on their part. Others want to learn how to pick stocks, actively manage their account, and possibly even take on a career in investing.

The books, blogs, and podcasts I recommend are much different for each path. Someday, I’ll get around to putting my list on my website, but for today, there is one book everyone should read to start their journey and it’s listed in my next point.

#2 – Read Simple Wealth, Inevitable Wealth by Nick Murray.

When my friend came to visit me at my office I pulled no less than eight books off the shelf and then mentioned another five more when he asked for some recommendations. I quickly realized that this would be overwhelming for anyone wanting to learn about investing. Especially someone in college who has plenty of reading to do as it is! 😂

Quick side note: When I was in college I couldn’t wait to graduate and begin my career. For some reason I thought graduation marked the end of learning and the beginning of working and earning. Let’s be honest… When I was in college I hated to read! However, once I began my career, I quickly realized that learning is the key to working successfully and increasing your earning potential. I now hold lifetime learning as a value of mine and I’ve discovered that I actually enjoy reading about things I’m interested in.

Okay, back to books. If I had to narrow it down to one book everyone should start with it’s Nick Murray’s book, Simple Wealth, Inevitable Wealth.

It doesn’t matter if you want to be a hands-on or hands-off investor. Either way, this book will provide the basic understanding of:

  • why stocks are essential to creating long-term wealth,
  • why it’s important to have an investment plan, and
  • what the true risks to a long-term investment plan really are.
  • Nick also explains why some investors (hands-off investors) should have a financial advisor guiding them through all the fears (and fads) investors can be sure they will face on their investment journey.

The book is actually generally sold to financial advisors to give to clients. It’s hard to find at a reasonable price anywhere other than directly from Nick. Note that you also want the most recent version which is the 20th Anniversary Edition. Get the book at NickMurray.com.

#3 – Read my whitepaper, The Power of Compounding.

I wrote this many years ago to illustrate how powerful compounding can be. In this paper, I discuss:

  • The cost of waiting to invest.
  • The Rule of 72
  • What it takes to accumulate $1 million.

#4 – Read my blog post, How To Create Wealth.

In this post I share my 8 Principles of Wealth Creation. These are the principles I’ve learned from my own experience.

#5 – Get started by opening a brokerage account.

I am a strong believer in learning by doing. The next step is to TAKE ACTION!

I recommend opening a brokerage account at Fidelity Investments.

Fidelity will be the custodian of your account. Fidelity will also give you a platform to buy and sell stocks, bonds, ETFs and mutual funds.

Most of the questions I get are on how to grow your money long-term and in the stock market. Due to the volatile nature of stocks it’s important that you don’t invest money that you will need in the next 5 years. There’s also no guarantee that you won’t lose money. The ideas in this essay are to give you some direction on where to look next. They aren’t investment recommendations or advice since I don’t know your specific situation and can’t determine their suitability for you.

With that out of the way, I know you are reading this for some ideas. So, I suggest you start you investment journey by selecting from 3 types of investments:

  1. A broad market index fund. You have likely heard of the Dow Jones Industrial Average or the S&P 500. These are indices that track the US stock market. The Dow is a 30-stock index, while the S&P 500 is an index that includes…you guessed it…500 companies! You can buy a mutual fund or ETF that owns all of the companies in the index. This is a nice starting point if you don’t have a lot to invest yet. You get exposure to 500 companies across all sectors of the US economy.
    • IDEA: My friend chose an ETF that tracks the S&P 500. 👉 iShares Core S&P 500 ETF (Ticker: IGV)
  2. An actively managed mutual fund or ETF (Exchange Traded Fund). An index fund is a passive fund because you are simply owning the stocks in the index. The alternative is an actively managed fund that is professionally managed. Active funds invest in themes or certain areas of the market. The stocks are hand-picked by the manager because the manager has done research and believes they will do well.
    • IDEA: My friend chose an ETF that invests in companies that are relevant to the theme of “disruptive innovation” defined as the introduction of a technologically enabled new product or service that potentially changes the way the world works. 👉 ARK Innovation ETF (Ticker: ARKK)
  3. Individual stocks. This category is for those who want to be more hands-on with the investments they pick. However, even as a hands-off investor it’s also good to own a few individual stocks to see how the market works and how stock prices react to things like company announcements, product releases, earnings reports, and other news.Create a list of companies you know well and then pick 3 to start with. A good principle to follow is invest in what you know. In other words, look around you to see what products and services you are buying or using. Find the stock behind those companies and start there. If the company is profitable and growing sales and earnings, it’s a good candidate. Do your homework. This is the harder part, but there are many books written on how to find and research stocks.
    • IDEAS: My friend walked away with a list of three companies that he understood well and planned to research further. 👉 Apple (Ticker: AAPL), Amazon (Ticker: AMZN), and Wal Mart (Ticker: WMT)

Never Stop Learning

Now that you have a basic foundation of investing in the stock market and your brokerage account is setup it’s important to keep learning. Read books, read blogs, and listen to podcasts to continue your education.

My team is constantly publishing content that can help you on your journey:

  • 7am Saturday: My weekly newsletter where I curate all of my writing as well as the most interesting content I discover. I share my recommendations for any books, articles, or podcasts that I find interesting or helpful as if we were having breakfast on a Saturday.
  • TonyHixon.com: A blog by Tony Hixon. Tony’s mission is to help people with their finances so they can invest wisely. But he doesn’t stop there. Tony approaches financial advice in a different way. He firmly believes that his readers aren’t served when we only look at the numbers. He views life holistically to make sure your life is in line with your values.
  • The Everyday Advisor Blog: A blog by Jessica Hinks, CFP®. Jessica writes to bring financial clarity for people just like you. Her blog will equip you with knowledge and inspire you to tackle your financial issues. Jessica writes with the goal of helping you experience the peace and contentment that comes with financial security and clarity.
  • The Invested Dads Podcast: Listen in as Josh Robb, CFP® and Austin Wilson bring you relevant and clear thoughts that enable you to be more comfortable with your financial situation. Through informed discussion, along with the occasional dad joke and some humorous banter, listeners can expect to learn about a variety of investment and financial planning topics as well as many of the stories and choices facing investors today.

You can signup to follow all of the above content on each of their email lists. Follow along, and I promise we will help you on your journey to make your money grow!