If you’re new to the world of investing, all of the ideas and terminologies being thrown around can easily become disorienting, to say the least. Our goal here is to start from the ground up, and assist you in building an understanding of investing that lasts and serves to boost your financial wellness.
Luckily, you don’t have to be a market aficionado to start a simple portfolio, and an even better habit. Origin makes it plain and simple to start growing your wealth, even if you’re entirely new to investing.
Stocks: Stocks are ownership of a small portion of a publicly traded company. The overwhelming majority of the globe’s businesses are “privately held”, simply meaning they’re not available for people like you and me to purchase shares of. Public companies, on the other hand, are companies that are traded on public stock exchanges, and this is where we get shares or, “stocks”.
Bonds: Bonds are technically “debt securities”, meaning you’re lending money to an entity (usually the government, but also businesses) in exchange for a certain return on your cash. Bond prices fluctuate based on demand too, but not as choppily as stocks do.
ETFs and funds: Think of ETFs, index funds, and mutual funds as packages of stocks. There are countless stocks to choose from, and funds make it easier to do. They aggregate and buy up a selection of stocks based on their criteria, and instead of buying all of these stocks yourself, you can just buy a share of that fund and achieve similar results.
What is the S&P 500? The S&P 500 is a stock market index that measures the performance of around 500 of the largest U.S. companies. It offers a picture of the health of the US stock market and the broader economy. The S&P 500 is just one of many indexes.
Investing is a key component of financial wellness, especially as we age, which is when the work we put in during our younger years starts to pay off.
In the US for example, retirees have access to Social Security when they retire, and the amount varies depending on your exact work history and age. However, government programs like this rarely ever replace an entire income, and most retirees find comfort in knowing they also have years of investment income to lean on as well.
This is what makes investing so important — it’s for the years you can no longer work, or simply don’t want to. While past results are not a guarantee of future performance, if you invest reliably for enough decades, it’s highly unlikely that you will exit the market without some gains to put toward your golden years.
And when it comes to making the most of our investments, the best thing we can do is give ourselves more time. The power of compound interest is real, and even just a few more years in the market can yield substantial differences in your overall returns.
In some ways, investing is just as simple as setting it and forgetting it, but in other ways, it’s not. Sure, investing can be simple, but there are still some things we need to be aware of if we aim to be prudent portfolio managers.
Bear markets: In aggregate, stocks usually go up in the long run, but simultaneously, stocks don’t always go up on an individual and day-to-day basis. The broad market undergoes a “bear market” about every 5 years on average, and 2022 was a great example of this. “Bear market” is a term that broadly refers to a down market, but more specifically, when a stock or index has dropped 20% or more from it’s most recent peak. These market cycles last about 9 months on average, and although scary at times, perseverance is important for long-term growth.
Volatility: Think of volatility like turbulence on a flight. It’s not inherently dangerous, but it can definitely be scary if you pay too much attention to it. Volatility in investing is when stock prices rise or fall in a rapid fashion, leaving investors in disarray.
Piggybacking off of volatility here, risk tolerance is essentially the culmination of how much volatility you’re willing to endure.
Stocks are inherently more volatile than income assets like bonds, which is why you’ll often hear advice suggesting older investors should shift their allocations toward “safer” assets as they age.
To understand your own risk tolerance, there’s a variety of things you can take into consideration.
Your time horizon: Younger investors have more room for error, and even a drastic market crash is unlikely to matter to them 2 or 3 decades from now. If you’re older, you have to start considering the consequences of a drawdown that the market doesn’t recover from by the time you retire.
Your finances: If you find yourself in a secure financial position, with a dependable income, an emergency fund, and sufficient funds to cover your expenses comfortably and even more, then it's generally acceptable to consider taking on the increased risks that come with investing in stocks and their inherent volatility—and conversely.
Your preferences: How much market turbulence can you endure? In recent years, investors have navigated through a series of apparent crises, experiencing a bumpy ride. If you're unfazed by the ups and downs and have a long-term perspective, you can ride it out. However, if you prefer to steer clear of such a rollercoaster, a higher allocation to bonds might be a more suitable choice.
Okay, but what the heck should I be investing in? Well, that depends largely on your goals, preferences, and financial situation, but we can provide some general guidelines.
Index, mutual funds, & ETFs are ideal investment vehicles for retirement investors, which is the main reason most are investing. Origin financial planners typically recommend index-based approaches, using either mutual funds or ETFs. A globally diversified approach can help minimize volatility while providing the best long-term returns for your risk tolerance.
Don’t forget bonds either. For most investors, a 100% stock allocation might be a bit extreme, especially as they age — that’s where bonds come in. You can buy individual bonds outright, but the simplest way to gain exposure to bonds is through bond funds.
We’ve created portfolios based on low-cost, globally diversified index funds that you can set and forget without having to worry about your investments. You answer a few questions and Origin will create a portfolio tailored specifically to your risk tolerance and time horizon. Our investment philosophy is based around optimizing for long-term growth instead of chasing volatile near-term gains — we’re focused on sustainability.
We make it simple for you to invest in both your core portfolio and thematic interests, this way, you get reliable growth without missing out on exposure to budding areas across AI, semiconductors, clean energy, and more.
With no management fees, Origin is able to help make investing accessible and equitable for all, and we view investing as an essential. With added benefits like easy customization, and automatic re-balancing, Origin Invest aims to take all the guesswork out of investing and make it simple and cost-efficient for anyone to get started.
We have to walk a tightrope between catering to the near and long term, and missteps can be detrimental. While it’s crucial we put back money for a rainy day, it’s also incredibly important to invest for retirement too. It’s the dichotomy of saving and investing and balancing the two — but how can we do both effectively?
Save first: Investing for retirement and taking care of your future is important, but not more important than the immediate future and avoiding debt in the event of an emergency. Establishing your emergency fund comes before retirement investing, but the good news is that it doesn’t require much. A good starting point is $1,000, and building that out to 1, 3, and eventually 6 months of expenses.
The roughing it stage: Once you’ve established your baseline emergency fund, there will be a period of time where it feels like you’re chasing multiple rabbits if you’re pitching money to investing, saving, paying bills, and debt, all at the same time. That’s okay, and it’s part of the process.
Developing a routine: No matter what stage you’re in, a routine is the key to saving and investing successfully. Create a budget for both your saving and investing needs, and settle on a certain percentage of your monthly income to allocate towards these areas.
Investing has become more accessible than ever. Essentially anyone with internet access can hop online, set up a free brokerage account, and start making trades within minutes.
This is great, but, it also means there are a lot of watered-down options out there and there are often hidden fees eating into investor’s returns. Origin Invest is here to solve that. With Origin Invest, new investors can begin growing their wealth in the same place they manage and track their net worth without worrying about fees.
Origin investment accounts have 0.00% advisory fees. Expenses charged by our custodian, DriveWealth, may still apply to Origin investment accounts. A list of all possible fees charged by our custodian is presented as part of the account opening process.