If you are thinking about getting into investment, you are likely unsure of how to start and what you should be investing in. The world of investment can be very intimidating for the first-timer. In fact, it can often be confusing for those who are experienced. The following are 10 tips that will help you get started in the world of investment.
1. Set Investment Goals
Now it is time to decide what you want to get out of investing. Obviously, your ultimate goal is to make money, but everyone’s needs are different. Things to consider include income, capital appreciation, and safety of capital. Also, consider your age, your personal circumstances, and your financial position.
2. Invest Early
The earlier you start investing, the better. For one thing, the sooner you start, the less money you will need every year to achieve your investing goals. Your earnings will compound over time, so don’t be afraid to start investing, even if you are a college student- or better yet, in your last year of high school.
3. Make Investments Automatic
Set aside a certain amount of money to be automatically invested each month. You can set up automatic investment plans through various brokerage service firms and automated investment services like Wealthfront. By doing this, you will avoid stalling and consistently invest
4. Look at Your Finances
Before you can begin investing, you need to look at how much money you have to invest. Be realistic about it. Make sure that you leave yourself with enough money to pay for your regular monthly bills, loan payments, etc. You don’t need a lot of money to get started with investing- but there are risks. You don’t want to leave yourself short of paying other important bills.
5. Learn About Investing
Once you have your finances in order, it is time to start learning about investing. Study basic terminology, so you know how to make coherent decisions. Learn about stocks, bonds, mutual funds and certificates of deposits (CD’s). Don’t forget about other details that include diversification, portfolio optimization and market efficiency.
6. Set Up Retirement Accounts
There are many tax advantages to having retirement accounts. In some cases, initial investments are tax-deductible, such as IRA’s and 401 K’s. Others require you to pay taxes up front, but not when you withdraw funds during retirement; these include Roth IRA’s (Individual Retirement Arrangement). Also, make sure to find out if your employer matches personal retirement contributions.
7. Be Wary of Commissions
Professionals will try to talk you into buying investments that give them high commissions. Don’t do this without some serious research. Some so-called professionals are well known for selling products that pay them big commissions, but don’t pay much to their buyers.
8. Diversify Your Investments
The market fluctuates constantly, and things always go up and down. To avoid losing too much money when stocks go down, make sure you have a diversified portfolio. That way, you will have some stocks that are rising, even when others are falling. Another option is to invest in overseas markets since they are notably different from the ones in the United States.
9. Study Your Portfolio
It is important that you always study your portfolio. What is right for your portfolio today, may not be the best for it tomorrow. It is important to know what you have, and where you might need to make changes in the future. When the economic climate shifts, be prepared to make investment changes as well.
10. Keep Informed
It is a good idea to always study the markets. Read up on the things you have invested in, and look for resources that keep up with market trends, as well as the global economy.