For many people, the word “investing” makes them think of men in suits on Wall Street, monitoring the exchange of millions of dollars on a stock ticker. But with so many different options, investing for beginners is simpler and more straightforward than ever before. It’s normal to be hesitant to start investing. It’s okay to have a lot of questions and doubts. That’s true of most of the firsts in our lives whether it was learning to drive, or riding a bike, going on a first date, riding a rollercoaster, or skydiving. Investing is no different.
The learning curve of investing, combined with the fact that you’re putting your own money at risk, is often enough to scare you away from what is actually one of the safest ways to financial freedom. Just remember you are not alone when it comes on to investing and even the most successful investors had to start somewhere.
What is Investing?
Investing is the process of buying assets that increase in value over time and provide returns in the form of income payments or capital gains. In a larger sense, investing can also be about spending time or money to improve your own life or the lives of others. But in the world of finance, investing in the purchase of securities, real estate, and other items of value in the pursuit of capital gains or income.
Where Do I Start Investing?
The best way to start investing depends on your financial goals, as well as how much money you can afford to invest. Before you start investing are four things to consider.
1. The State of Your Finances
First things first, it’s important to get real about the state of your finances. The fact of the matter is, you need to have a certain amount of money in the bank before you can even begin to open the investment account. How much exactly? It’s up to you, but experts recommend paying off debt, building an emergency fund, and contributing to your 401(k) before you start investing on the side. All the big investors say that before you even think of investing for the long-term you should set aside enough money in a savings account to cover your outgoings (mortgage, utility bills, insurances, basic food, and travel) for three to six months.
Think about the long-term and where you’d like to be in five years. Set smart financial goals for yourself, These can be short-term goals, medium-term (5-15 years), and long-term ones (15 years or more).
2. Do Your Research
Never invest in anything you don’t understand, often people buy into a person and not a product. You may think ketch adviser is smart and that the product is bound to grow, but if you don’t understand how it makes cash, there’s a good chance you won’t see any money. Know the different investment opportunities available. There are several including bonds, stocks, mutual funds, and real estate. Where should you begin? Talk to an investment consultant at your bank. Consider hiring a financial advisor. Ask your parents. Read books and magazines focused on finance. In the end, it’s just about finding the right fit for you and your finances.
3. Where to Invest
It’s much easier to spread your investments when you have more cash. However, if this isn’t you, the first thing you should do is put your money into one kind of investment vehicle like a company pension. A company pension plan is an employee benefit that commits the employer to make regular contributions to a pool of money that is set aside in order to fund payments made to eligible employees after they retire.
As your income and savings increase, put small bits of savings into different investment products. For example, shares, cash, and property will help to diversify your portfolio. This way, if one or two of them goes belly-up, you’ll still have the others to fall back on.
4. The Right Investment Account to Use
According to Forbes advisors, getting started with investing is relatively simple, and you don’t need to have a ton of cash either. Here’s how to figure out which kind of beginner investment account is right for you:
- If you have a little bit of money to start an account but don’t want the burden of picking and choosing investments, you might start investing with a robo-advisor. These are automated investing platforms that help you invest your money in pre-made, diversified portfolios, customized for your risk tolerance and financial goals.
- For hands-on research and choosing your individual investments, you might prefer to open an online brokerage account and hand-pick your own investments. If you’re a beginner, remember the easy diversification that mutual funds and ETFs offer.
- If you’d prefer a hands-off approach to investing, with extra help from a professional, talk to a financial advisor that works with new investors. With a financial advisor, you can build a relationship with a trusted professional who understands your goals and can help you both choose and manage your investments over time.
The biggest tip for those who want to start investing is to be patient. Investments take time. There will be ups and downs and the temptation to sell will always be there, prepare yourself mentally to stick it out. Manage your expectations, do your research and know what you’re getting yourself into, and enjoy the process.