Top Advice for New Investors

If you want to start investing, you may feel intimidated at first. There are many different options, along with opinions, about which type of investment strategy is the best. An excellent way to avoid feeling so overwhelmed is to start off with some basic investments to learn how the process works. Once you feel more confident about managing your money this way, you can start to branch out into other investments. Here are some of the most important things to remember as you start investing.

Start With Automatic Investments

Do you have a retirement account? Many employers offer sponsored retirement plans and may even match some portion of the money you contribute to your own retirement. If you are not already investing in this way, it’s an excellent place to start. There may be tax advantages for saving and investing money through a retirement account, and most of these plans don’t require any active oversight from you. If your employer doesn’t offer a retirement savings plan, you can open one up yourself through a financial institution.

Create a Custom Portfolio

You can gain insights from investment managers who can work with you to create a personalized portfolio. By discussing how much risk you are willing to take, resources you currently have, potential for earnings and plans for your future with a professional, you can give your portfolio a broad foundation that can help optimize both long-term and short-term goals. As your circumstances change, your portfolio can adapt to meet your needs.

Square Your Investments in Your Budget

Once you feel ready to invest some of your savings into the stock market, it’s important to make sure you don’t overcommit yourself. If you’re like most people, you probably plan to use your investments to save money and grow your wealth, rather than to form a portion of your active income. As with any type of savings account, you need to plan for your investments in your monthly budget. Set aside a certain amount every month to invest, and make sure to account for that money in your budget so you aren’t relying on it to pay your bills.

Understand Investment Risks and Rewards

Different types of investments come with unique inherent risks. As a general rule, low-risk investments offer more security but less opportunity for growth. On the other hand, higher-risk investments provide more opportunities for both growth and loss. There are numerous things that can affect the risk level of a stock or investment opportunity, so it’s important to have at least a basic understanding of how much risk you want to take with your money. Knowing how current events can affect investments can help you determine how to spread out your money in a combination of high-risk and low-risk options.

Choose Risk Based on Your Unique Situation

As a general rule, the amount of risk you accept in your investments should be tied to your overall financial situation and your life circumstances. For example, if you are using investments to save for retirement, it’s a good idea to choose higher risk/reward options during your younger years and move toward more secure investments as you get closer to retirement. A financial advisor can help you know how to balance risk and reward in the way that makes the most sense for your life.

Investing can be a complex process, but understanding the basics is an important first step toward taking an active role in managing your money. You can use investments to save for retirement and grow your overall wealth. Spending a little time to set up a retirement account and understand how stocks and investment portfolios work can lead to financial rewards.