Investing is one of those money topics that is both terrifying and exciting. It can be hard to balance the risk of a lucrative investment and the sensibility to be conservative. Demystifying investments will help you make the most out of your money. They can be a great way to get started setting money aside for big ticket items such buying a home or retirement, or just to see your money grow over time. But there are still some questions that linger…namely, which beginner investment strategies should I listen to?
How are you supposed to make money if you’re playing it safe?
How do you keep your money in a volatile market?
Here are a few beginner investment strategies that you may find helpful if you want to get started investing.
The Most Important Investment Strategies Beginners Need to Master
The Financial Fear Factor
There are plenty of different strategies for investing, and none of them are guaranteed to work every time. What I recommend doing before you begin any sort of investment is gauging how much risk you are willing to take.
Remember: Investing isn’t a way to get rich quick – it’s a way to keep your money growing.
A good way to figure out your tolerance for risk is to try a simulated investment tool. Essentially, it’s a game that allows you to test out investing strategies without the risk of losing real money.
I also like The MSB Cheat Sheet, a newsletter that provides tips for getting better at investing.
If you were to invest in an extremely volatile company, could you stand to see your investment’s value go up and down all week? Sure, you could end up selling for a profit; but you could also end up with a loss. If you aren’t comfortable with that possibility you may want to consider a more conservative approach such as investing in bonds or a company that is a steady performer (but with lower dividends). It’s all a matter of preference.
No matter what, you should be doing plenty of research before you actually put your money anywhere. Read all sorts of investing guides and ask your friends, family, or financial advisor for their ideas and advice.
Once you’ve found your investment sweet spot and how much risk you can tolerate, it’s time to get your money working for you. There are many different kinds of investment accounts such as:
- Mutual funds
They all accomplish different things, so make sure that you know where your money is going.
Do you want to save for retirement? Then look at IRAs and 401(k)s – accounts that allow you to contribute straight from your paychecks pre-tax. Be sure to also see if your employer offers any sort of matching contribution – don’t leave free money on the table!
If you’re looking for something that you can control a little more directly, an investment portfolio including stocks and bonds may be more your style. You ideally want to have several different kinds of investments in a portfolio so as you minimize your risk.
That way even if your stocks don’t perform great, you can still be making money from your bonds or mutual funds. You never want to have all of your “eggs” in one basket – a la Lord Grantham from Downton Abbey.
Play the Waiting Game
Another important thing to remember when investing is that you have to give it time. IRAs and 401(k)s should not be tapped into before your retirement (hopefully), so don’t plan on taking that money out anytime soon.
Even stocks should be left alone for a little bit. If you get in the habit of buying and selling every stock you own when it is even the slightest bit profitable, you could lose out on major payouts when those stocks hit high prices and you’ve already sold. Not to mention the fees you’ll incur from all your transactions! It costs money to trade – even with the lower cost brokers, like TradeKing (whom I definitely recommend!)
Hear from Kyle
My friend, Kyle Bumpus, former blogger and investing pro, shares his favorite beginner investment strategies below. He also references, hookers, strip clubs in Asia, and his Grandma (the three are not related.) Even though he's a goof, his investment advice is sound!
When it comes down to it, you’ve got to do what you’re comfortable with. Investing is overall a tool to build wealth, so when the time is right and you can get started, go for it!
Do you have a tip or trick that helped you when you started investing? Share it in the comments!