Investing can be a good way to grow one’s wealth over time. Instead of simply putting money away in a savings account, investors use stocks, bonds and various funds in order to reap impressive dividends that can secure them wealth, a comfortable retirement or a legacy to leave to their families.
However, investment takes a lot of planning and rational focus. The process is not always positive. Many people are drawn into taking bad advice and can end up worse off than when they started. First-time investors should take this very seriously. To that end, here are five tips for making sure that your first foray into investing is successful.
Be Realistic and Set Long-Term Goals
A lot of people get very excited when they think of the money they could earn from investing. Excitement is fine, but first-time investors should not let those feelings cloud their judgement. Instead of focusing on short-term rewards, they should think about setting long-term goals. Having a 5, 10, or even a 15 year plan for financial goals can make it easier to look at investing in a pragmatic manner. Do they want to invest enough so that they could possibly retire in 15 years? Do they want to invest so that they can receive dividends that will net them a house in five years? Developing a goal helps new and old investors alike.
Consider the Risks
When chosen wisely, investments can pay great dividends and can increase a person’s net worth. However, choosing to put one’s money into fluctuating markets can sometimes result in a loss. In some instances, these losses can be significant. New investors often get “sucked” into stocks or bonds that are promoted as “hot tips” or “sure bets”. In the realm of investing, such things are not possible. No matter how sure an investment source seems, new investors should make every effort to consider the possible risks of what they are doing. It would make sense to factor risks into their overall long-term plan, so that they can change their goals if and when something happens to the market.
Speak to a Qualified Financial Advisor
While there are many different resources available for new investors who want to do things for themselves, it never hurts to consult with a professional. A qualified financial advisor will be able to provide first-time investors with professional knowledge and experience.
According to Greg Major of Blueprint Wealth Investment Advisors: “A financial advisor will be able to point new investors towards a mixture of stocks, mutual funds and other sources that can be used to create profits over time. The partnership between a financial advisor and an investor is often long-term, so anyone getting into investing should do their research to find someone who is trustworthy and reputable.”
Spread Funds Accordingly
Many people who are new to investing may make the mistake of putting all of their available funds into one or two sources. This is a bad idea simply because it significantly increases the risk of loss if there is a downturn in the market. By ‘spread betting’ or diversifying sources of investment dividends, people can prevent losing all of their investments. This is commonly referred to as a “stock portfolio”. Investors can ask their financial advisors for advice on how to assemble one.
Think About How Funds Will be Paid In
A good deal of new investors tend to invest a lump sum of money at one time. This is not necessarily a bad approach, but it may be smarter for them to “trickle” money into their stock portfolio. This means that they buy one or two different stocks at a time, and continue the process in stages. This can assure a constant source of dividend-based income, provided that the market remains stable.
Investing: a Great Resource When Used Responsibly
Investments can be a wonderful way to build wealth for long-term purposes. Whether a person wants to save for retirement or just wants to amass a sizeable amount of money, it is a process that comes with considerable risks. People can definitely make a success out of their first time dabbling in investments. It just takes a sense of dedication, hard work and a devotion to planning or the long run.