How many times have you heard or read about people getting rich just by making the right investment at the right time? How did they know where to invest and that the risk will be worth taking? While choosing where to put your money used to mean facing a lot of uncertainty, the times when it was nearly impossible to predict what investments are profitable are in the past. In the modern market, trends are far easier to predict, which makes investing far more accessible to everyone, even if it will never be completely risk-free.
From my experience as an owner of a small business, I have found that fear of the unknown and getting taken advantage of are the main factors which make most people reluctant to take the first steps of becoming an investor. Yes, there is always the possibility of making the wrong decision, but then again, there are few things in life where you can always make an accurate assumption. If you are looking for some advice on how to get started with investing, below are some tips and basics I think every beginner should know about before making their first investment.
When to start investing?
The best time to start was probably yesterday, but now can be just as good. Although you might be intimidated by the vast number of options, the risk and all the stories you’ve heard, keep in mind that the first steps of getting started with anything are the hardest. This is probably augmented by the prospect of losing money you’ve worked hard for, but once you get past your initial fears, you will start gaining confidence and become more comfortable with making decisions.
Determine your goals
Much like with everything else, knowing where you want to be is the first step of getting there. Of course, when investing, you want to generate as much profit as possible, but the important questions you should be asking yourself here are “how?” and “by what time?” Answering these questions will give you an idea of whether you want to go with short or long-term investments and how much risk you are comfortable with taking.
Knowing yourself is important when setting goals, since you want them to be realistically achievable for you. There is no sense in making risky investments if you are uncomfortable with the potential money loss. On the other hand, if you are looking for a completely risk-free investment, you will probably never start.
Determine how much money you can invest
There are a lot of ways you can find the funds for your first investment. In the best scenario, you would have some money set aside, either in your savings account or an unexpected source of income, allowing you to get started with money you can spare. Of course, if you are in a different situation, it doesn’t mean you should wait too long, since there are other ways you can gain access to additional funds to invest.
Taking out a loan is one of the easiest ways to get you started, if you are not comfortable with selling your assets, and your bank is not the only institution you can turn to for this purpose. For example, OurMoneyMarket offers loans for all purposes at competitive rates, so make sure you consider your options when it comes to taking out a loan before going through with it.
The amount of money you have available for investing is an important factor in determining how to proceed. However, this doesn’t mean you need a small fortune to start investing, since you can start out with virtually any amount, but having more funds will give you more options.
Come up with an investment plan
Once you know what your goals are and how much money you have to get you on your way to achieve them, you need to make an investment plan. Knowing the answers to all the questions from previous steps will help you identify what types of investments are right for your situation and expectations, which will reflect your plan.
It is important to be realistic at this point, and be aware of the potential returns and risks associated with the investment of your choice. If you are not comfortable with managing the investment plan yourself, you can hire an advisor, as long as you are willing to pay additional fees. Once you know your goals, have the money and a plan which matches them, you are ready to start investing.
Do your research
The advancements of technology and the amount of information available to us makes it simple to research anything, and you should use that, in order to be able to make educated assumptions regarding the best ways to invest your money. All the answers are out there, you just need to dig in and take the time to gather all the data, before determining what your best options are.
Manage the risk with diversity and mutual funds
Although putting all your funds in a single promising investment may seem like a great way to generate profit, you will want to keep your portfolio diverse, in order to make a steady income. This means managing the risk by spreading your money over different types of investments, since some of them will do well, while others will not, and having money in both of them will mean having a good combined return.
Investing in mutual funds is another way of balancing the risk when starting out, as it is a less risky option in comparison to buying stocks in single companies. Although the risk of losing money is always involved, it can be minimized by good risk management and investment strategies.
Achieving success with investing your money is about being able to make good long-term decisions. Although you may not feel up to it as a beginner investor, like most skills, it comes with experience. However, the advice I’ve given you above should provide you with a good starting point when considering where to invest, and help you do something good for your future. So don’t hesitate and start making your first steps towards becoming a successful investor.