Whatever your hopes and dreams are, you’ll need financial stability to realize them. Employment and an upward career path are a great start, but life-changing results only come once your money starts working for you. And that’s why you need to start investing.
Indeed, investing can be your ticket to financial success or even freedom, but with so many guides and experts on this subject, taking your first step into this area can feel intimidating. Why? If you take bad advice and don’t do it securely and precisely, you might lose your money faster than you earn anything.
In this beginner’s guide, we explain the essential steps you need to take to become a savvy investor. Take our tips to heart and start looking forward to a safer, more prosperous financial future.
Get Your Finances In Order First
Depending on where you are in your financial journey, investing might not be the optimum strategy. For example, putting more cash toward paying off that 28% interest credit card loan makes more sense than investing it somewhere first. You’ll also want to save up for 3-6 months of expenses before you start investing.
This is because when you need money quickly, you might be tempted to withdraw invested money. However, doing that prematurely can hurt long-term growth and, in more extreme cases, result in penalties.
Lock In Your Investment Goals
What will you be working toward, or, more precisely, what’s the end goal for your investing journey? Answering that question will do much to inform your investment strategy.
Short-term goals like vacations or vehicles benefit from high-yield savings accounts. Conversely, long-term dreams like retirement or your children’s college education are better served by investment vehicles that prioritize growth over liquidity and can weather market fluctuations over time.
Regardless of your aspirations, the worst move is not investing anything if you’ve dealt with the first step. Starting now puts you in the best possible position to take advantage of the snowballing effect of compound interest.
Understand What You’re Investing In
With your money and future on the line, familiarizing yourself with the various asset classes, instruments, and strategies at your disposal let you make informed investment decisions.
Diversification in investing is key since it leads to more stable returns and reduces the risk brought on by individual volatile assets. You can diversify by investing in multiple asset classes – stocks, bonds, mutual funds, etc. Alternately, investing in an asset like stocks but spreading the investments among different industries is also viable.
Importantly, always be aware of current investing niches and trends, as it might help you find better investment opportunities. To do so, regularly follow financial news outlets or subscribe to investment newsletters. If these options do not satisfy your knowledge needs, consult with a credible financial advisor.
Find a Dependable Investment Platform
With the right platform, newbies can adopt a hands-off approach to investing while reaping the benefits. Your 401K or IRA comes to mind, but other platforms also exist.
For example, robo-advisors are beginner-friendly services that automatically invest for you, primarily into Exchange-Traded Funds (ETFs). They’re cost-effective and transparent while ensuring diversification and steady gains. Thoroughly research your investment platforms and pick the most highly-regarded ones that mesh well with your investment goals.
Secure Your Investment Accounts
Another advantage to using such platforms is being able to track and expand your investments with a few button taps. However, doing so comes with its own risks, this time not of the financial kind. On the one hand, not using a strong, unique password and two-factor authentication can leave the account vulnerable to takeovers and data breaches.
On the other hand, you risk exposing sensitive information each time you access an investment platform over unsafe networks like public Wi-Fi. Using a VPN before interacting with your finances online is essential since a VPN for the US or other region encrypts and secures the connection. This keeps anyone who might be monitoring the network from intercepting and misusing the investment information you send, receive, or review.
Let Time Be Your Ally
Markets are notoriously fickle in the short term, which can put novice investors on edge. While you should periodically review your portfolio, checking it too often can lead to unwise, emotion-fueled decisions like panic selling.
Remember that indices like the S&P 500 bounce back even from shocks like the great recession given enough time, meaning holding your assets is a sound decision.
Begin Your Journey As an Investor
Investing might seem intimidating at first since it involves money and letting it go for a certain amount of time. However, it’s one of the best ways to employ your money and make more by making smart investment decisions. Use the tips provided in this article, and you’ll quickly get the hang of investing.
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