How to Invest Your Money: A Beginner’s Guide

How to Invest Your Money: A Beginner’s Guide
  • Opening Intro -

    You may have been thinking about investing for a while now but don't know where to start.

    Saying the word “investing” is intimidating enough, let alone doing it!

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Even though there may be a learning curve, that shouldn’t stop you from investing. There are a lot of benefits to setting up an account and making money from investments!

For the sake of simplicity, I’ll cover investing in stocks in this article. But beyond stocks, there are other ways to invest your money, including:

  1. Bonds, such as mutual bonds and certificates of deposit
  2. Real estate
  3. Cash, which includes cash equivalents and interest-paying savings accounts

If you’d like to know where to start, here’s a brief guide on how to invest in stocks. Check out this overview, then open an investment account. Before you know it, you’ll be a skilled investor!

1. Learn About Stocks

Before diving into investing, it’s wise to have a basic understanding of the stock market.

Stocks are also known as equities, which means you own shares in a company. Believe it or not, when you invest in stocks, you become a part-owner of the company.

As an investor, you lend money to various companies with the expectation that you’ll make a profit in the future. If all goes well, you’ll earn money from each share as their prices increase.

By investing in stocks, you can set up a successful and profitable future for yourself. Although, even though the intent is to make money, it still comes with risk. There is always a chance that you’ll lose money, which we’ll get into next.

2. Understand the Risks

Know that no investment comes without risks. Even the world’s savviest investors lose money sometimes.

Get into investing with the understanding that it is a long-term, not a short-term, activity. In other words, you shouldn’t invest two hundred dollars only to pull it out a few weeks later.

Once you invest money, allow it to appreciate. That way, when you reach your goal, you’ll have all the money you need. If your goal is to keep it there until you retire, don’t pull it out until then. Otherwise, you risk losing out on potential earnings.

3. Decide What Type of Investor You Are

Before plugging into the world of investing, you first need to figure out what type of investor you are.

There are three main types of investing:

Doing It Yourself

If you’re doing it yourself, it’ll take a lot of time. A lot of research is involved, as you’ll be managing your investments on your own. You should also open a brokerage account with a service like Vanguard. There, you’ll be able to buy and sell individual stocks.

Keeping track of your existing investments should be your primary goal.  Although, it’s still worth your time to research companies you’d like to invest in (if you have more funds to invest).

Being in charge of your portfolio is nice, as you’ll be the one making the decisions!

  • Hiring a Stock Advisor

    With a stock advisor, you’re still in charge of the decisions. But,  an expert will provide insights and do all the research for you. If you’re short on time but still prefer to have your own account, a stock advisor is the way to go.

  • Robo-Advisor

    A robo-advisor will take the reins and do everything for you. First, you’ll answer a few questions about your goals. Then, the software will do all the work for you.

    One of the biggest robo-investing platforms is Betterment. It’s suitable for both stock market newbies and experienced investors.

4. Figure Out How Much to Invest

You don’t need a large chunk of money to begin investing. It’s possible to make quite a bit of money by investing small amounts over time. Even if you can only afford to contribute one hundred dollars a month, it still will build slowly over time.

Before investing, look over your finances. If you have any high-interest debt, you should pay that off first. The same goes for student loans.

If it’s going to take a while to pay down your debt, but you’d still like to invest, see what you can do. It may be worth it to work off your debt while making tiny contributions to your brokerage account.

Investing even a small amount will help you save for the future and have a nice nest egg by the time you retire!

5. Automate Regular Contributions

So that you’ll continue to earn money off your investments, it’s smart to automate your contributions.

There are many ways to do that. One method is to have it come out of your paychecks. Or, set up automatic investments using an investment company’s website.

For example, if you have a Vanguard account, all you need to do is activate the automatic investments setting. Then, choose how much you’d like to contribute each month. You can do fifty dollars a month, two-hundred a month, or whatever works for your budget!

6. Figure Out How You’d Like to Use Your Earnings

When you commit to investing, set up some goals right away. You can be either a short-term or long-term investor.

With short-term investing, it’s easier to withdraw the funds when you need them. If you’re working toward a short-term goal, such as buying a house, it’s best to invest your money for at least ten years.

Long-term investing is ideal for earning money until you retire. You’re likely to lose some money through the years, but your investments have more time to recover from a stock market downturn if it happens.

Both short and long-term investing have their own set of risks. Although, diversifying your investments can help reduce those risks. Focus on making careful decisions so that you’ll set yourself up for success.

other related articles of interest:

7. Avoid Fees as Best You Can

Since the goal of investing is to make money, try to reduce your fees and fund expenses.

For example, if you can manage your account independently, paying an advisor could be excessive.

Here are a few fees that may sneak up on you to keep in mind.

  1. Account maintenance fees
  2. Advisor expenses
  3. Mutual fund loans
  4. Trade commissions

Conclusion

In closing, investing money is an exciting venture, but it still comes with risk. Before investing a lot of money into stocks, do plenty of research. Even if it means hiring an advisor at the beginning, do what you can to ensure your investments are successful.

Keeping track of your investments on your own is smart, but it’s vital to stay on top of them. If you have a busy lifestyle, hiring an advisor may be a better fit for you.

Investing can ensure you have money for your retirement, and it can set you up for a financially healthy life. Continue educating yourself on the process, and you’ll become an investment pro!

Author bio

Caitlin Sinclair is the property manager at Mirella at Foxboro, a new apartment community in North Salt Lake, UT.

Image Credit: how to invest your money by envato.com

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