Investing for Beginners: Where Do You Start?

Article by Emma White

stock-investingThe financial world is so jargon-heavy that it’s difficult to get started if you’re a complete newcomer to the idea of investing, and as a Veteran you likely have other pressing concerns you’d rather be concentrating on. Even if you are interested in investing, it can be an intimidating idea, just because it carries an element of risk with it, one that puts a lot of people off the idea. There are ways to minimize the risk, however, and if you’re interested in investing and looking for a place to start, here are some tips to get you going.

What to Consider before Investing

One of your main considerations is how much control you want to retain over the investments you make. Do you want to do your own research, choose your own investments, and manage your own investment account, or would you rather have a financial advisor handle this for you? You don’t necessarily need investment experience to take care of these things for yourself—you just need the willingness to learn the things you need to know.

You’ll also need to make a tentative decision about where you want to invest your initial funds, and how much you want to invest. If you plan to manage your own investments, it’s typically best to start off putting a small sum of money in a low-risk prospect, while you figure out how things work.

As a final thought, consider whether there are better things, financially speaking, to do with the money you’re thinking about investing. For example, it’s better to pay off any short-term debts you have before putting money into investments, because short-term debts typically have high interest rates. If you’re investing instead of paying off those debts, any profit you make on the investment is probably being negated by the high interest on the debt.

Three Simple Ways to Get Started in Investing

Perhaps the easiest way to invest is by putting money into a 401(k), if you have a job that gives you access to this kind of account. There are a couple of big advantages that make this a pretty painless and advantageous way of investing money: first, you can set the account so that payments are made to it before you get your paycheck. Once it’s set up, you’re automatically saving and investing money without even having to think about it. The second advantage is that your employer may opt to match your payments, which makes your account grow much faster.

If you don’t have access to a 401(k) and you would prefer a hands-off investment style where you provide the investment funds and someone else takes care of all everything else, then you might consider putting money into a mutual fund. This type of investment is a fund that’s built and managed by a team of financial experts, who use investor money to buy shares in many different stocks and bonds in multiple different industries. When you buy shares in a mutual fund, you’re essentially buying shares in everything the fund has invested in. One of the golden rules of investing is to put money in multiple investments, instead of just one or two—spreading the risk around makes it less likely you’ll suffer heavy losses—and a mutual fund is a good way of achieving this.

An exchange-traded fund, or ETF, works in a similar fashion to a mutual fund, but the ETF is linked to an index, which is a stock market listing. That means you can track your investment’s progress on the stock market, so investing in an ETF is a good beginner investment if you later want to make your own stock purchases.

Investing in mutual funds and ETFs is easy these days, as you can do it online, on personal investment websites. Most sites allow you to start investing with as little as $100, so it’s a good low-risk way to get started. There are several reputable investment sites that offer a good range of products, like TDAmeritrade and Betterment.

Sources

Betterment. “Why Betterment.” Accessed May 14, 2014. Personal investment site.

Charles Scwhab Investments. “Types of Investments.” Accessed May 14, 2014. Creating a diversified portfolio.

Dan Base. “7 Questions You Must Ask Before You Invest.” Accessed May 14, 2014. How much risk are you willing to take?.

Forbes. “How to Invest $1,000 Right Now.” Accessed May 14, 2014. Three simple ways to invest.

Matthew Amster-Burton. “How to Invest $100, $1,000, or $10,000.” Accessed May 14, 2014. Investment accounts.

NASDAQ. “The Ten Commandments of Investing.” Accessed May 14, 2014. Best practice investment principles.

TDAmeritrade. “Investment Products.” Accessed May 14, 2014. https://www.tdameritrade.com/investment-products.page Different types of investments.

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