You’ve got money, probably not much, but you want your money to multiply. Once you’ve got things like debt, budgeting and saving under control, you need to consider investing. Most people when starting out feel that it is overwhelming. But it’s not as difficult as it seems. The following advice will get you started down the path of investing.
1. Start now
You are never too young to start saving a small amount every month after getting your paycheck. The longer you invest, the better your finances will be in the long run. There are many hurdles, but if you invest from an early age, compared to one who starts later in life, in the end you will have more money because of compounding return rates.
2. Talk to a professional
Find out about all the available options. You can speak to an investment advisor at your bank regarding whether you should invest in a registered retirement savings plan or open a tax-free savings account (TFSA). Once you get informed about all the various accounts, their advantages and disadvantages, then you are better placed to make informed choices.
3. Start with what is familiar
A simple way to enter into the stock market is to buy things you know and are familiar with. If you enjoy drinking a green tea latte daily, consider buying Starbucks shares. If you want to get your feet wet and be creative, buy Apple’s shares if you own an iPad or iPhone. But you need to separate this from serious investing. If you are in your early 30s, you may perhaps want to buy a house. The idea is to invest with a long-term goal in mind.
4. Diversify
Exchange traded funds and mutual funds can be good investment options for young people who don’t have enough assets to make their own diversified portfolio. Mutual funds can best be described as a basket of investments; anybody can put any amount of money into this basket.
5. Keep it simple
Investment gurus such as Warren Stephens advise to keep it simple when investing. Don’t try to predict the unpredictable, or focus on irrelevant data points. Those who do this are more likely to encounter pitfalls when investing. By keeping it simple, for example by concentrating on companies with economic moats, requiring a safety margin, and investing with a long-term goal, you can significantly increase your chances of success.
6. Have reasonable expectations
Are you investing in stocks with the hope of getting quick riches? Unless you are extremely lucky, your money won’t double in the next year. You can’t achieve such returns unless you take a big risk such as buying extensively on a margin. By doing this, you have ceased investing and turned into speculating. Though historically, stocks have been the class of assets with the highest returns, this still means returns ranging between 10 and 12 percent. These returns are also very volatile. If you don’t have the right expectations, you will experience irrational behavior such as trading too much, taking on a lot of risks in get-rich-quick schemes, or swearing off stocks forever due to a short-term loss.
7. Be patient
In the short-term, stocks have a tendency to be volatile. Trying to predict the short-term movements of the market is impossible, and it can make you distressed. Too many investors focus on the popularity contests that take place every day, and they become frustrated when the stocks of their companies don’t move. Instead, be patient and focus on the fundamental performance of a business. Given time, the market will identify and value the cash flow that your companies produce. Many media houses are competing to get the attention of the investors. Most of them make efforts to present and justify the daily price movements of several markets. Unfortunately, the changes in prices rarely reflect any real change in value. So as an investor, learn to exercise patience.
Investing is not as mysterious as it seems. When you want to become an investor, it is good to start early. You also need to talk to a professional for you to get sound advice on how you can begin investing, and the types of accounts to set up. By following this advice, you will walk without stumbling in your path to investing.
These 7 steps are what I did when I was still a beginner in investment. And, I think one important factor is talk to a reliable and credible professional who can make an great impact on how and where you invest your money.
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You make a great point about being patient when it comes to investing. There is always the dream of fast cash, but that can be quite risky. Start learning when your young, continually build your financial base, and wait as your savings and retirement start to take care of themselves.
Before you invest in stock market, it’s very important that you must be familiar on how stock market work.
I have a friend who motivated to enter in this field because of what he read about the success stories of other people. He failed because he really don’t have any idea what he’s doing.
I like 5 out of your 7 rules, but I’m not too sure about numbers 2 and 3.
Here in the UK, advice from professionals is expensive and unless you already have £50K invested, it probably isn’t worth paying for. You can learn 95% of what you need from blogs now anyway.
I think starting with what you know contradicts your advice to diversify. I would diversify right from the start – get a few low-cost ETFs to begin with and work your way up from there.
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Thank you for sharing so many tips on how to invest properly. Specifically, you talk about how talking to a professional is important because this will give you the necessary information you need to know what is out there and how to make the best possible investment according to your financial situation and needs. As you say, this ensures that you are in a better place to make informed decisions, and I completely agree. I will definitely be sure to look at my options and talk to a trusted professional for my investments. Thank you for sharing!
Talking to the professionals is always a good start. Someone who already knows the ends and outs will be able to push you in the right direction.
Patience is definitely not one of my virtues, so I appreciate this reminder about not getting too worked up or excited about the stock market. I know that it changes so frequently, and it used to stress me out like crazy. Now, I check it about once a week and that helps me stay calm about it all.
I believe in doing your research and speaking with the professionals. In doing so, you’ll be able to make a more informed and confident decision in how to invest.
Thanks for sharing these wonderful investment tips for beginners.
The various assets owned by an investor are called a portfolio. As a general rule, spreading your money between the different types of asset classes helps lower the risk of your overall portfolio under performing.
I agree that you are never too young to invest your money. I think kids should even learn to invest. It’s not going to hurt them, but will instead alter there life for the better.
Great tips! The most important though, is for someone not to stop talking to people who have already invested.
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These are some good tips. Before you start investing anything it is very important to do the research. Without understanding what you are actually doing you are taking a danger with your money. And that is really not needed. Good blog!
That is smart to start with stocks or trading ETFs, that you have heard of and think could potentially grow. I like your tips about how to decide what to invest in, by selecting something you like to use. Learning to manage your finances now, sounds like an perfect way to prepare for the future.
Investing time into proper planning is key to turning your dreams into reality. Operating a small business is not just about working for yourself or working from home, it’s also about having the necessary management skills, industry expertise, technical skills, finance and of course a long-term vision to grow and succeed.
Good tips. I would add “do it consistently”. Dollar cost average investing has shown to be a great way to invest when you are still building your investment/retirement accounts. The average share purchase price is always going to be lower than the actual average share price – just due to the math of the process. So maybe that can be a bonus #8. 🙂
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I’ve been thinking about investing my money because I have heard about the benefits. I’m glad that you mentioned starting in a familiar industry. Because I am new to investing, I would want to invest in something that I am passionate about. Thanks for the insight!
Being patient is probably the hardest thing for me, but it is very important. These are all great tips, thanks for sharing!
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good morning from france,
I agree with you tips, starting early is one of the most important key, with compound interest. Talking to a professional happen so less, most of people take care about rent when they are 6 or 7 years before, so most of the time it is to late.
thank for your work
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