Watching your money grow is a great feeling. Investing your money wisely is a great way to create and maintain wealth. Once you have your debt, budgeting, and savings under control, it is time to consider investing your money. However, it is easy for young, new investors to get overwhelmed quickly. For new investors there are a few things that you will want to keep in mind when starting to invest your money. Let’s explore some investment tips that anyone investing their money should take note of, especially young investors who are just beginning to invest their money.
1. Research or Be Safe
Making good investments takes a lot of solid research. If you are not going to take the time to do this substantial amount of research then you should strongly consider investing your money in funds instead of investing it in individual stocks. Funds are a great option for young investors without a diverse portfolio. You can invest as much money as you’d like into a mutual fund, this fund may have millions of dollars in it along with your money, a mutual fund manager will then make the investments on behalf of the fund. Investing in this manner takes a lot of the risk and responsibility out of your hands.
2. Know What it Will Cost You
For every transaction there are fees you will be charged in accordance to what the transaction is. There are brokerage account fees that are charged annually to maintain a brokerage account. Then there are trade commissions which are charged by brokers for trading certain investments like stocks. Expense ratios are annual fees charged by mutual funds, exchange-traded funds, and index funds as part of a percentage of your investment in the fund. In the case of mutual funds there are also sometimes sales loads which are a sales charge or commission to the broker or sales person who sold the fund.
These are a few of the more common fees you will come across, but it is important to be aware of all of the costs you will incur by investing.
3. Hunker Down For The Long-Term
A lot of people have the common misconception that they can turn a quick profit by playing the markets. While it is not impossible, it is highly improbable that you will make money in this fashion. To be successful with your investments make them for the long-term. Forget about watching the market everyday. Keep an eye on your stocks and other investments to see how they are progressing. Obviously, if they grow to point where you feel it will be in your best interests to sell then sell, but remember investing is for the long-term not for a quick gains. You are investing with an eye on the future.
4. Know Your Risk Tolerance
Risk tolerance is how you feel about risk, the anxiety you feel when risk is present. Risk tolerance is based somewhat in genetics but it is also influenced by education, wealth, age, and income. To put risk tolerance in the simplest terms it is the extent to which one may choose a negative outcome in the pursuit of a very favorable outcome or a big win so to speak. Risk tolerance varies between people, and there is no right amount of risk tolerance one should have. The important thing you need to know is how much you are willing to risk. Be aware of the amount of risk you are willing to take on.
Investing is a great way to shore up your future. It is very important for young people to start investing as soon as possible.