If you are new to investing, or if you are thinking about making your first investment, we are here to provide some easy tips for New Investors. Investing can be a lot of fun, but it can also be extremely frustrating if we don’t fully understand what we are getting in to. Some people invest to save, and some people invest for the “thrill” of the stock market. Whatever your reason is for investing, it is very important to fully understand what investing is all about…in a nutshell at least.
Of course we are not going to all be a financial expert; that is why we hire a financial advisor…like me. Of course we all don’t have time to watch our investments daily; this is why we receive regular investment account statements. As a financial advisor my job is to make sure that clients understand the basic elements of investing, the rest is up to the market.
Here are 5 easy tips for New Investors:
Don’t expect to save a lot over night. No one becomes rich over night, it takes time. The good thing about being a young adult is that we can set long term investment goals. We can watch our investments grow over time as we reach our goal. I recommend investing a percentage of our salary as opposed to a fixed dollar amount. As our salaries increase over the years the dollar amount of our investment contributions will also increase, but the percentage will remain the same.
Be prepared for market fluctuations. Investments, especially Mutual Funds and Stocks, will fluctuate daily. Therefore if we invest $1000, our investment value can change to $900 one day and it could be $1100 the next day. Fluctuations depend on the amount of risk that we choose to take for our investment.
Don’t be too aggressive. If we are new to investing, it is best not to start out too aggressively, and not invest our money into extremely high risk investments. Bond Mutual Funds or Balanced Mutual Funds are a good investment for new investors. These are investments that have low to medium risk. Investing in Bond or Balanced Mutual Funds will give us exposure to the market and allow us to experience small fluctuations in the value of our accounts, without taking too much risk.
Have a set goal. It is easier to invest when we are working towards a set goal. Long term investment goals for young adults could be to buy a car, to buy a home, and plan for our retirement. Having a set goal also helps us determine how much we need to save on a biweekly or monthly basis.
Ask Questions. It is ok to talk with our family and friends about investing. People may not be very open about the actual monetary value of their investments, but generally people are open about their investment choices. It is also ok to go into your bank and ask questions. Make an appointment with a financial advisor; let them know that you are thinking about starting to invest. There is a lot of information available for new investors.
Photo by Victoria Peckham