Getting started investing can be overwhelming, but one Wall Street veteran has advice on how to get a foothold in the market.
Former Wall Street analyst and founder of fintech startup Empify, Ashley Fox believes successfully growing wealth comes down to two things: “You can invest in your own ideas, or you can invest in other people’s ideas.”
“Now, I’m not telling everyone to start a business because… I’ve been through a lot to get to where I am today,” Fox said in a new episode of Yahoo Finance’s Financial Freestyle podcast (see video above or listen below). “But that doesn’t mean you can’t invest in other people’s ideas.”
While landing a high-paying job was once a quick way to build wealth, Fox admits it’s no longer that simple. For those who lack the confidence to invest in their own ideas, investing in others is a great way to diversify their income.
“Times are completely different now, and you don’t have to rely on just one role or one job for your income stream,” Fox said. “There are many ways to efficiently build wealth that you can’t get rich by working hard or saving.”
Grow Wealth Through Dividends
The first thing a new investor usually does when starting to build a portfolio is to assess their risk tolerance. Growth stocks tend to be stocks of companies that are growing rapidly and appear to be very profitable, but investors should evaluate the long-term durability of these stocks.
For those with a lower risk tolerance, it is still possible to earn passive income from dividends by investing in more experienced companies with less volatile stocks.
“Some companies will take out 40, 50, 60, 70 or even 80% of their profits every month or quarter and give them to investors, the average person,” Fox explains. “While you can’t get rich quickly, you can accumulate sustainable income that will allow you to retire comfortably, replace your old job income, pay off debt, and travel the world.”
Investors don’t have to constantly trade to earn consistent dividends — and finding a few stable stocks is actually the key to creating passive income from your investments.
“Some of the largest, best-performing companies have been paying dividends for 20, 30, 40, even 50 years, and people have retired on that income,” she said. “So dividend income, passive income created by investing in dividend stocks, dividend ETFs… and real estate investment trusts, etc., allows people to participate without having to put a lot of money in, and it can accumulate over time without relying on a credit score or a lot of effort.”
During particularly volatile times in the market, new investors can also take certain precautions to ensure that the stocks they invest in will provide them with consistent and stable returns.
For example, looking at a company’s historical returns, especially during downturns, can help investors understand whether their investments can withstand a possible recession.
“The best time to shop is when the market is down,” Fox said. “The best time to learn about investing is also when the market is down. Now is not the time to panic.”
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