Welcome to 2016, everyone – hope it’s off to a fantastic start! If you’ve been hanging around GenerationYRA for a bit of time now, I could imagine you’ve got some killer finance goals for 2016 lined up.
One of those goals you may have? Investing!
That’s right, getting that intense “I” word out into the open. Luckily today, we’ve got a guest post from Shannon Leonard on tips for first time investors! So whether you’re seasoned and need a little brushing up, or just venturing into investing for the first time this new year – check it out. Here’s a little intro about Shannon:
Shannon Leonard is a freelance writer who resides in Los Angeles, Calif. In between researching and writing her latest pieces, Shannon enjoys exploring all LA has to offer—especially the beaches. She’s also learning to cope with the fact that Kobe Bryant is retiring.
So let’s get this 2016 party started with A Few Tips for First-Time Investors!
For a lot of young adults, the idea of investing money is still just that: an idea. We tend to know that investing is considered a good idea, and we may even have some specific thoughts as to how much cash we can put aside or which investments make sense. But actually putting money aside for growth is a big hurdle, and there are a lot of different factors to consider when it comes down to it.
To simplify the process at least a little bit, here are a few vital tips for first-time investors trying to figure out what to do.
First and foremost, determine your budget. There’s really no sense in delving into investments if you’re not certain that you have enough income to set some aside to put into the market. That’s not to say you need to build up a significant fund before you take any action; there are actually numerous strategic ways to invest on a smaller budget. But you’ll still want to have a thorough understanding of how much you’re putting in before you make any more specific decisions.
Another step you’ll want to take before you actually start putting money into any sort of financial market is to take a little time to figure out your goals and tendencies. Investing with a blind goal of “making money” or “growing your income” sounds nice, but it really leaves a great deal of strategy unaddressed. To figure out a more specific outlook, you’ll want to do some thinking about how risky or conservative you tend to be, and what specifically you hope to do with your investment. This will help you to see if your goals align with your personality, which is something most successful investors and traders figure out early on.
Once you’ve made these early determinations, the next step is to decide which trading method suits you, and there may be more options than you even realize. Here’s an overview of four of the main methods available to first-time investors:
- Invest Through A Broker – The most conventional form of stock market investment is to simply buy and sell stocks as you see fit. This is done through a broker, who technically executes the trades for you, though these days the process operates very quickly. This type of investment involves a great deal of personal attention and decision-making. It also requires higher fees for executing trades, as well as (usually) higher initial investments.
- Invest Through A Mutual Fund – There are advantages to investing through mutual funds, but the basic idea is that you would be buying into a portfolio that’s already been set up by a professional. Others are invested in the same portfolio, which gives the professional more money to operate with, and more room to diversify. No investment is “safe,” but this is often viewed as a more stable option for steady, gradual gain.
- Invest Through An App – In just the past two years, we’ve seen the rise of programs that essentially function as automated brokers for individual investors. In other words, you can trade stocks on your own through the app, usually with lower fees and lower entry amounts.
- Look Into Alternative Investments – This isn’t always an option when you’re just starting out, but it’s still important to remember that there are innumerable ways to invest your money that don’t involve the stock market. In fact, we even now have a number of websites that allow individuals to buy into startup companies (though this is generally regarded as particularly risky practice).
Beyond these specific tips, the most important thing is to educate yourself on the investments you do decide to make. There’s a lot that can be learned simply by figuring out how to read stock charts and analyze patterns—and if you’re investing through a mutual fund, you won’t even need to go that far. But it’s even more important to gain a firm grasp on the companies and industries you’re ultimately trusting your money with. Constant, unceasing education is arguably the most important factor for any investment process.
Thanks so much, Shannon for stopping by!
Do you plan on investing in 2016? What are some plans you’ve got to make your money work for you? If you already are investing, are you switching up your strategy?
Hope you are all having a rockin’ 2016 so far.