More than 50% of US households have some type of investment in the stock market, with many employer or union-sponsored retirement plans having values that are linked to the stock market. Despite this fact, a very small percentage of American families (14%) invest directly in individual stocks. However, as stated by Investor’s Business Daily founder, William O’Neill, “You don’t need to have a hefty trust fund or ultradeep pockets like mutual funds and other institutional players to start investing.” So, take note of the following tips to commence the entertaining, fruitful undertaking that is investing.
Undertake a Financial Audit
Before making your first investment, you should define your financial goals and determine what exactly you are investing for—popular reasons include retirement, the wish to purchase a new or second home, and financial security. Analyze how much income you are making and choose the type of investment (low, medium or high risk) that corresponds to the amount you can afford to lose. Have an emergency nest set aside in case an investment turns out worse than expected. Never invest more money than you can afford to lose while still living comfortably and enjoying a financially sound retirement.
Conduct Research into Investment Strategies
When researching investment strategies, rely on professional-grade research by experts in finance with a solid, proven track record. Be careful of ‘get rich quick’ schemes and high-risk investments that promise a guaranteed gain. Literature like The Near Future Report review looks into specific investors and tells if the insight they share is trustworthy and valuable. In other words, when reading books, reports, online articles, and blogs, also make it a point to read reviews on their net worth, the accuracy rate of their predictions, and their qualifications. It is always a good idea to rely on a professional financial advisor as well; someone who can recommend an array of options from the investment type you choose and who can give you estimates of appreciation and depreciation over a specified period.
Play Around with Investing Small Amounts
If you have a small amount of savings that you feel does not merit expenditure on advisors or thorough research into the type of investment to pick, a robo-advisor can be a good place to start. The latter is an automated investing platform that invests clients’ money in pre-created, diverse portfolios which are customized to their desired goals and risk choice. If you enjoy the process of choosing from a number of different options, an online brokerage account may be the right fit. The latter enables you to buy and sell investments from a broker’s site. Usually, the site will offer a good range of mutual funds, bonds, and stocks. Once again, read reviews of online stock brokers. Currently, a few highly-rated sites include Fidelity, SoFI, E*Trade, and Interactive Brokers.
In order to build wealth systematically, making regular investments is key. You can either make automatic or payroll deductions, but ensure your money continues to flow in both directions and take calculated risks. Missing a month on the stock market during a specific period can result in a much lower annualized return. Try the practice of dollar-cost averaging, which involves investing a fixed dollar amount at specific intervals, irrespective of how the stock market is doing. Even if the market is in a free-fall and your instinct tells you otherwise, timing markets is impossible for a variety of reasons—including fluctuating oil prices, the Chinese economy, fluctuations of the value of the US dollar, and more.
If you wish to start investing, start out by researching if possible into how to do so consistently without too much risk. Start out with small amounts, using automated investment platforms and reputable websites. Work out what your ultimate goal is and how much you wish to make, using dollar-cost averaging to ensure you don’t miss out on particularly lucrative periods experienced by the stock market.