3 Tips for First Time Investors
Learning how to invest and how the stock market works can be a big challenge for first time investors. There’s just so much information out there that you might feel paralyzed with indecision. Fortunately, it’s easy enough to get started investing without knowing all of the basics first. You can invest while you learn the ropes.
Set Some Financial Goals
Setting smart financial goals can help you stay focused in your investing, but you need to keep things reasonable, especially when you are just starting out. For example, you might start with a few short-term goals, such as setting aside a specific amount of money for investing each month, maxing out your IRA accounts each year or gradually increasing the percentage of your income that goes toward a 401k. A long-term goal would be deciding how much money you want to have in your investment accounts when you retire. When setting long-term goals like this, try using an investment calculator to help break it down into how much money you should be setting aside each month in order to reach that goal.
Make Time for Learning
There’s so much to learn about the stock market, investing and choosing the right companies to invest in. It’s easy enough for you to tell your employer to take out money for your 401k and have the brokerage put that money into the fund based on your age. After all, these people are experts and generally know what they’re doing. Still, you want to be an active investor. The targeted fund might be the smartest move for now, but you may also want to pick companies and buy stock in those. It can be fun to research and choose which companies you think will be a hit. Set some time aside every day to learn about investing. This might include reading books, reading the Wall Street Journal or just checking the daily financial news. It won’t seem like a lot at first, but your knowledge will gradually increase.
Understand the Role Age Plays
Most people invest money in order to have a nest egg at retirement. Social Security alone isn’t always enough to get by. This means that you have to plan your investments wisely. Some stocks or mutual funds are considered riskier than others. There’s a potential for high growth over time, but you might also lose a lot of money in the short term. Other stocks are considered safer investments and you’re less likely to lose money. The closer you get to retirement age, the more you want to shift your investments into safer choices.
It’s not necessary to have a firm grasp on the stock market in order to get started investing. The sooner you start, the sooner you’ll see your money grow. Simply make a commitment to start investing your money and make adjustments over time as your situation changes and you learn more.
Jonah Engler is a successful entrepreneur, investor, franchise owner and coffee lover who hails from New York City.