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People new to investing have much to learn when it comes to the financial world. Being smart with your hard-earned money is essential and many young people need to understand the value of the stock market at an early age to plan for both their short term and long term financial goals. Investing may seem like a complicated game when there are so many options in the stock market to buy or sell stock and bonds. Plus, investing in stocks can seem risky. But, in the long run, if you leave your money to sit for long periods of time in stock exchanges or retirement accounts as opposed to basic savings accounts, it may really pay off. Here are some of our most basic tips for people just starting to invest so you won’t lose money.
Figure out your risk tolerance.
For people new to investing, it is first important to assess risk tolerance. Young people who are buying and selling/investing in stocks for the first time will want to decide which stock exchanges are best for them over the long term, and it will all depend on their risk factor. Some of the best S&P 500 index funds can be lower risk to invest in, but it will take research to figure out which mutual funds and stock exchanges make the most sense for you in the long run.
Diversify your investments.
A great way to lower risk, especially for people new to investing, is to diversify your investments. This means investing your money across multiple stocks, bonds, and/or index funds. This way, if any of your investments such as Dow Jones or Apple happen to plummet and lose money, your eggs won’t all be in one basket.
Plan for the future.
New investors should know that although there is no way to predict what will happen with your retirement accounts or your stocks and bonds long term, you should still have a set plan for the future. With a 401k, for instance, you should be planning to invest in a specific portfolio of stock exchanges that will work in lieu of a savings account for when you retire.
Stay committed long term.
People new to investing need to understand that investing only works when you are committed to the process long term. It takes time to build money in the stock market, and if you pull money out too quickly, then you will either lose money or your account will work just like a savings account as opposed to gaining anything. It is important to leave your money in stock exchanges and index funds for the long run so that money can grow.
Keep your eye on the stock market.
When investing in the stock market, it is, of course, important to always keep an eye on what is changing with stock exchanges day to day. Every hour, stocks and bonds can sky rocket and plummet. This can affect whether you make or lose money and whether or not you want to buy or sell stocks. For people new to investing, it is important to watch your investments closely and watch the stock market every day to stay informed.
Learn from your mistakes
It is inevitable to lose money when dabbling in the world of investments. It is important that people who are just starting to invest know this fact. This doesn’t mean that you shouldn’t continue to invest in the long run and reap the benefits of long term investment in the stock market. Investing is a great way for young people to plan for retirement and for long term goals. But make sure to learn from your mistakes when you do lose money and change up your strategies the next time around. Over time, your knowledge will grow in the finance world and you will understand better ways to invest and protect yourself and your assets for future growth.
Invest what you can afford.
Many people new to investing get overly excited thinking they will make a lot of money in stock exchanges and index funds and end up investing way more than they can afford. This is similar to gambling. This is a fast way to lose money quickly. Don’t make this mistake. Only invest what you can afford and do it sparingly over time. Use your 401k or retirement account and invest small amounts over the long run. That way, you will never lose money that you don’t have.
Invest passively and consistently.
As mentioned above, new investors need to make sure they have a strategy for how to invest their money. Whether it is a 401K, a Roth IRA savings account, or even apps for first-time investors such as the Acorns investing app that discreetly pulls from your bank account and invests for you; find a system that works for you and make sure it’s consistent.
Though you don’t want to go over the top as a new investor, people just starting to invest should also be sure to trust themselves through the process. Only you know your financial situation and your spending habits. If you feel that you are able to invest a certain amount and the risk is worth it, then go for it! You can always sell your stocks and bonds later if need be. If you stay somewhat frugal, then the risk won’t be too scary. Investing can be a fun and exciting process.
Why You Should Start NOW
Young people new to investing need to know how important it is to start investing right now! Not tomorrow, not next month, but now! The sooner you start, the sooner your money will grow. If you start investing while you’re young, you will be so thankful when you retire and you see the amazing amount of growth that your money has had over time. You’ll be able to retire happily in peace without finances worrying you in your old age.
Take these investment tips with you and get busy researching. Now is the time make the most of your money. Happy investing!