6 Tips on How to Start Investing On the Right Foot
Many people think that once they start juggling with stocks, bonds, real estate or jewelry everything will work out just fine for their personal budgets. But while you dream of becoming the next Wolf of Wall Street, reality shows that investing is a rather murky business with ups and downs you cannot foresee. Of course, you can place your investing activities on the shoulders of a broker and then just sit back, relax and count your money, but this isn’t a safe bet either.
There are dozens of visible and invisible variables at work and while nobody expects you to control them all, you should at least know what you are getting yourself into. So before letting your hard worked money out there to roam free in between investments, let’s see a quick list of tips to help you start this journey on the right foot.
1. Learn, Learn and Learn
This might sound like a truism, but you’d be surprised how many people get charmed by the illusion of getting very rich in a very short amount of time and plunge head first into something they don’t fully understand. Before anything else, as a beginner, start learning the language of investment and the main principles it works on. Make sure you read reputable sources and get your mind fully wrapped around concepts like “stock market performance”, “diversification”, “investments reviewing”, “market timing” and so on. Learn which the best investments to start with and go from there.
2. As a Corollary… Make the Investments Yourself
It is a common mistake to think that getting a professional financial advisor will get you there faster and safer. The experts themselves cost a lot of money, and your high profits may very well go down the drain after you paid taxes, fees and commissions. If you plan to invest small at first, there is free and available knowledge and information everywhere you look, so get your facts straight and test the waters.
3. Make Sure You Know Exactly Why You Invest
At a first glance, everything is simple and logical: you want a supplemental source of income. But this is where those murky waters start to whirl: do you want to make some money to go with your retirement plan? Do you want to make some money now, on the spot, to solve a financial crisis? Do you want to make sure your newly born children have solid college funds when the time comes?
4. As a Corollary… Go for the Long Haul
One of the most common and destructive mistakes people make is that they don’t look at investments as long term plans. For instance, you can solve a simple short term money problems by accessing a quick and easy loan that won’t get you bankrupted yet get you out of trouble. But if you plan towards retirement or you want to boost your income for the rest of your life, you need to focus on that particular goal, as each comes with a specific set of rules and risks you need to be aware of.
5. Pick an Investment Strategy and Stick to It
After you learned enough about investments, it is time to place your eggs in the right baskets. For instance, get those retirement savings of yours and place them in a target-date retirement fund. If you have other goals, then spread your money across two or three investment classes and keep your eyes on them, adjusting them regularly. Some of these areas of investment might work better than others, but remember you are in for the long haul, so a few drops here and there won’t hurt you.
6. As a Corollary… Never, Ever, Panic
The worst case scenario involves a market crash, huge stock drops, bonds’ fatal diving and so on. The first rule of investments is that everything goes up and down, every day, in every area. If you don’t learn how to manage your investment panic and let the media or your social circle throw you into a world of paranoia, you will probably make serious mistakes on the long term. You have to lose money to make money sometimes, but making a purchase or a sale based on a one-time hit of the panic button is more damaging than losing a few hundred or thousand bucks on a bad day.
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