5 Tips for Beginning Investors
When you first start out as an investor, it is easy to become overwhelmed. You might be thinking about retiring rich, but you have to start somewhere.
Whether you are opening a tax-advantaged retirement account, or whether you are looking for individual dividend stocks to add to your portfolio, investing can be intimidating. However, there are some things that can help a beginner slow down, evaluate the options, and find success:
1. Do a Little Research
Clearly, too much information can lead to overload, and problems making a decision about how to invest. To begin, it’s wise to have an understanding of the basics, though. If you want to invest in stocks, research a little bit about how the stock market works, and how stocks are traded. The same principle can apply to bonds, funds and other investments. Start with the basics, and do a little research into evaluating investments.
2. Look for Low Fees
Next, look for investments that come with low fees. Whether it is a low administrative fee on a fund, or a low, flat transaction fee for an individual stock, you can make sure that you keep more of your earnings by being aware of fees.
3. Just Do It
Get started. With a little basic research, it is usually easy to get started with investing. Do some preliminary research, and then begin. A low-cost all-market fund is often considered a good place to start for beginners. It provides you with the ability to invest – and get compound interest working on your side – with limited risk. You can do a little more research and more carefully develop your investment plan later, while your money is growing.
Make your investing automatic. Whether you have money taken from your paycheck to contribute to a retirement fund before you even see it, or whether you have an investment account automatically deduct it from your checking account each month, automation can be a tool in your favor. It ensures that you regularly investing – without even thinking about it. Regular contributions are important if you want to build wealth reliably. If you want to speed up the process, consider a few entrepreneurial ideas to make some side income. That will allow you to add money more quickly to your account.
5. Don’t Follow the Market Obsessively
Many experts will tell you that periodically re-balancing your investment portfolio is a good idea. Unfortunately, many beginning investors obsessively track market movements and wind up making poor decisions based on short-term volatility. You can protect yourself from your own panic instincts by not obsessing over day-to-day market performance and by sticking with a carefully thought-out investing plan.
Likewise, avoid placing too much faith in media talking heads that sensationalize investment news. Remember that they are paid to get people riled up. However, it may not be the best thing for your investment portfolio if you are making decisions from a place of fear. Blocking out some of the noise can be one way to preserve your portfolio.
There is always the risk of loss when you are investing. When you are new to investing, though, this risk can be crippling as you try to build wealth. However, if you create an investing plan, and stick to it, making decisions with a level head, you are more likely to see success over the long haul.
Neal’s notes. Thanks Miranda for a great post. I think these are all really important tips for the person just starting out. Once you have a little money put together, it makes sense to consider other investment strategies that work. But the most important step for people just starting is to get that money set aside and working.