Stock Market Guide to the Basics of Investing
It seems every day we’re bombarded with offers, enticements and pitches to get us to invest our money. It can become confusing, even disheartening after a while, especially for those just getting started in investing. One should remember that all of those companies who advertise investing strategies are businesses whose priority is to make money for them first and you, second. When it comes to investing basics, the basic tenet should be “me first”. So, what can a new investor do to put themselves first? Start by ignoring the hype and reviewing the fundamentals of investing so that when it comes time to put your money on the line, you’re doing it with the knowledge that your strategy is right for your situation right now, and just as importantly later.
The “later” refers to your retirement, an event that may seem very far off but at the same time should be at the forefront of your investment priorities. When planning for your retirement it helps that you have as much time as possible. This is because the combination of regular deposits, compounded interest and significant tax advantages can result in your nest egg growing into quite the appealing omelet by the time you quit the rat race. Whether it’s a standard 401-K plan from your company or one of the alternate plans like Roth IRAs, investing for your retirement will help you sleep at night, confident that your savings are growing without your having to do much about it.
Not everyone is looking at their retirement from the end of a telescope, however, and that leads to the possibility of many other types of investment. Once again, a back to basics approach works best and impulse investing is to be avoided at all costs – no pun intended. Ask yourself, “What are my investment goals?” The answer may be short term, such as buying a house, or medium term if you have children who will be attending college or university some day. Once you’ve set out your goals, ascertain how much money you can set aside month to month for investment purposes. If it seems like a small amount, try not worrying. “From little acorns, mighty Oak trees grow”, goes the old adage. Ask your financial advisor what a reasonable initial and monthly investment plan add up to in dollar terms. Your advisor can also review your income calculations to ensure you’re able to accomplish your investment plans as originally set out.
Lastly, all investments incorporate a certain amount of risk. Consider just how much risk you’re willing to accept in order to reach your goals. Typically, younger investors take on a greater risk quotient than older investors because in the event of a loss, they have more time in which to make a recovery. That’s why bonds and other more secure investments often make up a larger percentage of an older investor’s portfolio. In this case as well, your financial advisor can help you arrive at a level of risk you can be comfortable with. You work hard for your money – by investing responsibly and referring to the basics of investing, you can let your money work hard for you!