- Set a deadline and choose an investing goal
Now that you know the different investment options, it’s time to determine your goals and set a timeframe for your goals. Are your goals short-term or long-term? How much will you need to achieve them?
- Short-term investment
If your goals are short-term, meaning that you will need the money in a few years, you will need to buy stocks whose expected earnings are supposed to soar within a short period. This type of investing is referred to as growth investing. Some of the strategies you need to employ to realize quick and higher returns include peer-to-peer lending or saving your money in a high-interest savings account.
The upside of short-term investment is that you can access your money when you need it as it is not tied up. More so, it is a low-risk type of investment. The downside is that you will have low returns since your money has only been invested for a short period, and depending on the kind of investment, you may be required to pay high taxes.
- Long-term investment
This is the most common type of investment when you are looking to save for retirement. It involves buying stocks and holding them for years, hoping that the returns will be worth the wait. Some of the long-term investments include real estate, stocks, and bonds.
The upside of long-term investment is that you have plenty of time to wait for your stocks to recover from a dip in the market. Besides, you do not need to keep checking on it daily, making it less stressful. This type of investment requires if you want good returns and you cant access your money as you wish as it is tied up.
- What is your investment budget
Budgeting is essential if you want to have a handle on your finances. Besides, if you’re going to start investing, you must have a budget to save money. So, ensure to put aside a huge chunk of your funds for investing. You can find many free budgeting apps on the internet, and if not, you can use a spreadsheet or just record it in your diary.
Read Also: The Ultimate Beginner’s Guide to Budgeting and Saving
- Reduce the fees and the expenses
When your investment option has many fees to be paid, you’ll end up having a smaller amount to invest. So, always ensure that there are not many expenses involved and that you are not getting ripped. Some of the costs that professionals will request include account maintenance costs, commission, advisor fees, and mutual fund loads.
Look for investment products that are free for beginners. Some accounts that are free for investments below $5000 include advisors and the wealth front.
Risk Tolerance And Diversification
Before placing your money in the stock market, determine how much you are willing to lose because you may win or lose. The best way to manage risks is by placing your money in different ventures. This helps you avoid losing all your money, and this concept is referred to as diversification.
For instance, if the stock market is performing well, the bond market may plummet; thus, having money in both ventures helps you limit your losses.
So, always invest in a range of investments from stocks, MMF, bonds, and cash to ensure that you will recover them in another when you incur losses in one venture. This keeps your portfolio safe and growing with time.
Summary
As you start your investment journey, you should understand all that you are investing in. Never invest in a venture that you do not understand. If you are working with a professional, as questions about the things you do not understand, and on your own time, read on investing.
Remember, you can start investing at any time and stay committed and focused. Do not rush because you may make a mistake; it’s safer to go slow and steady.
