10 Tips For People Who Are New to Investing :
If you are thinking of getting into an investment, you can start investing in a very small amount of money. But you are unsure about how to start and where to invest in. The investment world can be overawing for a new investor, but sometimes it’s still confusing for a professional investor as well. Here are some investing tips for you to get started.
1. Set your Investment Goals
Before starting your investment, decide what you want to get out of investing. Your goal is to make money, but different people have different needs out of it. Consider your age, your financial stability, and some extra bills.
2. Find your Comfort Zone
There are many investment options you can choose, and the degree of risk varies accordingly. Your “Comfort Zone” means owning a suitable portfolio that is perfectly aligned with your various goals, investing timeline, and risk tolerance. Mainly consider your risk tolerance, as it is a very complicated subject to be determined.
3. Look at your debts and needs
Before you invest, clear all your high-interest debts. Make sure you have an emergency fund, and living expenses for at least 6-9 months are kept safely somewhere. You can’t invest all your money in stocks or bonds as it doesn’t provide early dividends. So keeping cash on hands (Liquidity) is necessary.
4. Determine your timeline
Your timeline plays an important role in choosing a suitable investment. If it is extra money that you are investing or investing for your retirement 20 or 30 years away. Then you can go for a long-term investment plan such as stocks. But if you are investing in your children’s education or need short-term investments then you can choose “safer” investments such as bonds or other fixed investments.
5. Invest Early
The earlier you invest the better returns you get. The sooner you start investing, the less money you need to achieve your investment goals. Nowadays everyone starts investing with a small amount like a minimum amount of $100.
6. Minimize Taxes
There are many types of accounts like retirement and taxable accounts. Important is what kind of account carries what kind of tax benefit investments. Also, correct investment can help you cut tax and keep more investment gains.
7. Research before you Invest
Having complete knowledge of all types of investment options and their difference is important. You should know the terms and conditions for your investment plans. Research carefully on every investment products like mutual funds, ETF’s, stocks, etc. Also, visit online websites for more information such as investopedia.com, fool.com and much more.
8. Develop a Plan
Investment Policy Statement (IPS) is a written plan that helps you to get well organized for your investment. It includes paying your child’s education, retirement funds, or growing your money. How and where are you going to invest? The amount of risk you take to get a reasonable return. All this comes under it.
9. Be Wary of Commissions
You may get contacted with professionals for buying investments that give them high commissions. Make sure you have a well-researched portfolio about them. Because they make you buy investment products that give them high commissions but don’t pay much to their buyers.
10. Rebalancing
Rebalancing your investment portfolio once a year involves buying and selling investments maintains your assets of allocations. Moreover, every investment involves the risk of losing and there is no portfolio to ensure your profits or guarantee your loss. So invest after a complete knowledge.
