Money is something that everyone wants. Specifically, we want more than we currently have. Investing is one of the best methods for growing any amount of money into a greater amount.
But investing, like all new endeavors, comes with its own attached learning curve. There are new terms to learn, like “risk tolerance” and “mutual funds.” Investing also involves planning for the future in a way that endeavors to imagine how inflation will affect invested savings.
In this post, learn where to start when you are ready to begin investing your money.
First Things First: Decide How Much You Want to Invest
You can tackle this task in a number of ways. There are a number of methods that may make sense when deciding on an amount to invest.
– Percentage of monthly income. You may decide to invest a specific amount each month that coincides with payday. This way, you can auto-draft the funds from your account.
– Lump sum amount. If you have saved up some cash already, you may want to invest that lump sum into one or more investment vehicles.
– Investing apps. A number of interesting investment apps can help you start investing right away, even if you only have spare change to work with.
Next, Decide On Your Learning Approach
Learning about investment is the key to maximizing your investments. Just as you wouldn’t try to ski a black diamond slope (the hardest and most dangerous type) before taking a single skiing lesson, so too it just makes sense to learn all you can about investing before beginning to choose where to put your own hard-earned funds.
Some people like to adopt a do-it-yourself approach, which can work if you have a lot of free time and a strong interest in investing matters. For others, it makes more sense to seek out the help of investment services to guide you in putting together an investment portfolio (a collection of investment vehicles, or types) that best reflects your financial needs, goals, estimated retirement age, number of dependents and more.
Now, Select Your Personal Risk Tolerance
A big part of managing risk in investing is something called “diversification.” This term translates to mean “spreading out your risk by choosing some higher risk and some lower risk investments.” You can likely see how this strategy might make sense, especially if you don’t have a lot of money to invest and the impact would be heavily felt if you lost it all.
Generally speaking, if you are young and just beginning your career, you will likely have a higher risk tolerance than someone who is heading towards their golden years and is eager to retire. The higher your risk tolerance is, the more you stand to earn on your investments, but the more you also stand to lose. So for a young person who has more time to recoup losses and strategize, it can make sense to include a few higher risk investments with potentially big payouts.
But no one can decide this for you – if you need to keep your money close at hand (“liquid” is the term for this) then your risk tolerance will be lower than if you have other funding sources you can access in a pinch.
Finally, Make Your First Investment!
No feeling is quite like the feeling you get when you make your first investment. It kind of feels like a longer-term version of playing roulette (with a lot more research and expert insight added). You are watching the wheel spin and eagerly anticipating your winnings. And it sure does feel great to watch an investment you’ve chosen grow!
With a firm foundation of investment basics, wise counsel to advise you and a long-term strategy as your guide, you can begin to enjoy the process of investing and earning.
