5 Tips for Immigrant Investors
Investing is essential
The path to wealth for most of us is not our career or carefully saving. If you want to grow your wealth, you must invest. Consider this example:
From the time of Amazon's IPO (initial public offering, when the company went from private to public and began selling its stock) in 1997 and December 2020, the stock created almost $1.6 trillion for its shareholders. If you had invested $1,000 in Amazon in March 2003 and sold it at its height in July 2021, you would have made more than $133,000.
That return on your investment wouldn't have required anything from you other than an initial investment and the patience to let the power of compounding interest work in your favor.
Investing is essential. These 5 tips for immigrant investors will help you grow wealth and create financial security for yourself and your family.
Obtain an ITIN
You do not have to be a U.S. citizen to buy stocks in American companies, but you do need an ITIN (Individual Tax Identification Number). You can open a brokerage account using an ITIN with companies including Fidelity, Vanguard, and Charles Schwab. These three companies don't require clients to have a Social Security number to create an account and trade stocks.
Create an account online, fund it with money from a checking or savings account, and you can start trading stocks, typically within a business day or two.
Do your research before investing. If you're new to investing, you may prefer to invest in an ETF (exchange-traded fund) or mutual fund, which allows investors to invest in a "basket" of stocks. This kind of investment offers diversification and eliminates the need to research individual stocks, which can be confusing and time-consuming for new investors.
You can choose an ETF or mutual fund based on factors including risk tolerance and time horizon. Generally, risk tolerance means the split you want between stocks and lower-risk assets like bonds when investing. Typically, the younger you are, the more risk you can take. Time horizon is the amount of time you plan to hold the investment.
Establish credit
Many people don't think of credit when they think of investing, but your credit score can be an essential part of your investing strategy and is an enormous part of your financial life in general.
Real estate is an investment, be it your primary home, a vacation home, rental, or commercial property. Or you may want to borrow money to start your own business. In the U.S., you need a credit score to borrow money, and you need a healthy credit score to borrow money at the best interest rate.
And that interest rate matters because the lower it is, the more money you save over the life of the loan. When borrowing five or six figures, interest can cost you tens of thousands of dollars. You can't avoid interest entirely; it's the cost of borrowing money. But you can pay less interest with the right credit score.
What is the right credit score? You don't have to strive for the perfect 850 credit score. In order to get the best interest rates, lenders want to see a score of 760 or above.
Establishing credit can be challenging for new immigrants. In most cases, any credit history you may have had in your home country doesn't follow you to the U.S. And there are barriers immigrants face that citizens new to credit don't face. That's why we created Upwardli!
Upwardli removes the barriers that often hamper immigrants' attempts to build credit. We don't require a Social Security number, and there are no credit checks. Upwardli gives users instant approval so they can start building credit immediately. Let Upwardli be the first step on your credit-building journey.
Learn the terms
You can only learn about something if you speak the right language, and investing almost seems to have a language of its own. Luckily, you don't have to be fluent to get started! But you do need to learn some basic terms.
We've created an investing glossary to help you understand common terms you'll see as an investor.
Start early
If investing is the secret to wealth, the secret to investing is time, not money, not genius, just time. There is no secret to investing, but there is a secret ingredient, and it's called compound interest. And compound interest requires time.
Compounding happens when the earnings on your investment are reinvested to generate their own earnings. Consider this example:
If a 25-year-old began investing $200 a month (with a 6% return, pretty average for the stock market over time), when they turn 65, they would have $393,700. But if that investor waited until they were 35 to start investing $200 a month with the same 6% return, when they turn 65, they would half almost half of that, $201,100.
That's the power of time. Waiting that extra 10 years to start means $192,600 less.
Start now; you don't need a lot of money. Many investing platforms don't have a minimum to get started. If you have $10, you can begin investing.
Be consistent
To be successful in any endeavor, playing an instrument, a sport, fitness, you must be consistent. The same is true for investing. Use the principle of Pay Yourself First (PYF). PYF means budgeting money for your financial goals, like investing, just as you would budget for any other important expense like a rent or mortgage payment.
When we're not intentional with our money, it often disappears before we know where it went leaving us with no money for our financial goals. PYF eliminates this problem.
Two great ways to PYF are to contribute to your employer's 401(k) if one is available. The money is automatically taken from your paycheck and invested in the retirment account. Another option is opening your investing account as described earlier and creating regular, automatic deposits. The money is invested before you ever get a chance to spend it!
There is no secret
There is no secret to successful investing that people like Warren Buffet or Ray Dalio know and are keeping from the rest of us. The not-so-secret way to become a successful investor and grow your wealth is time and consistency. It's really that simple!
How Upwardli can help
Upwardli was created to help those new to credit, including immigrants new to the country and the U.S. financial system, build credit quickly and easily. You'll be instantly pre-approved with no credit check or deposit. Each Upwardli account includes an unsecured line of credit to help build your credit quickly, and we report your progress to the credit bureaus.