About 58% of Americans own stock, either in an IRA, 401(k), mutual fund, or individual stock. Only 25% of those earning $40,000 invest, while 89% of earners above $100,000 do so.
At the same time, the majority of Americans are afraid they don’t have enough saved up for retirement. The only way to overcome fear is to take action.
You need to learn how to start investing. No matter what you earn, you can start to invest in your future.
The good news is that you’re in the right spot to learn investment tips that will help you get started. Read on to learn the top tips for beginner investors.
1. Ditch High-Interest Debt
You fully can’t realize monetary growth if you’re still saddled with high-interest debt. Credit card debt comes at a high price because interest rates often exceed 20%.
Even if you’re a successful investor getting a 20% return on investment, the interest you pay on your debt will eat away at your profits.
Your number one priority is to make your high-interest debt disappear. Make a plan to take care of the debt as soon as you can.
If that means temporarily cutting expenses to reduce the debt faster, then do it.
2. Take Personal Inventory
One of the biggest mistakes that beginners make is that they invest without much thought about what they want to accomplish.
This is a time to take a personal inventory of your investment goals. You might want to save for retirement or buy your first home.
The other piece of your personal inventory is your willingness to fail. What would happen if you lost all of your money in the stock market?
Can you take the volatility of the stock market, or do you like something that has growth potential with more stability?
These two things are critical to understand because they dictate your investment vehicles and investment strategy. If you want to save money for a home, you need something that will grow steadily while avoiding losses.
A certificate of deposit, Treasury bond, or money market account would give you the cash when you need it.
If you’re saving for retirement and you’re one of the older beginner investors, you have to take more risks. A conservative approach won’t get you to your goals.
3. Ignore the Hype
Everyone seems to have an opinion about investing. One week cryptocurrency seemed like it was the answer to everyone’s problems, the next week it was NFTs.
Don’t forget about cannabis stocks, EFTs, and real estate crowdfunding investments.
There’s a lot of hype in the investing world, where one tweet can change the fate of an investment vehicle.
You can’t afford to get caught up in the hype. Think critically about people who push certain types of investments. If they make you feel like you’re missing out on something, ask yourself what they have to benefit from your investment.
4. Choose Investment Vehicles Wisely
There are so many ways to invest your money. You can try something safe like a mutual fund to an individual stock. It can get overwhelming for beginner investors.
Look at how much you have to invest. If you’re a high net-worth individual, consider investing in alternatives or commercial real estate properties.
The best investment for beginners with little cash on hand is an S&P500 fund. It’s stable and you can see how the investment works for you.
Create a plan to diversify your investments. This prevents heavy losses should one type of investment tank.
5. Research and Assess
You already learned that you shouldn’t buy into the hype. What should you do instead?
Research.
One of the best resources available is sec.gov. This contains filings from publicly traded companies. You’ll want to read a company’s quarterly and annual reports.
You can also search for information on mutual funds and insurance products.
Analyst reports contain detailed information about companies from an outsider’s perspective. Analysts look at everything from the management team to key vendor relationships.
There are two ways of analyzing a company. The bottom-up approach looks at a company and then the entire industry. The top-down approach takes a look at the industry.
6. Invest Often
Investing in a couple of stocks isn’t going to help you reach your goals as fast as you’d like. Choose the right stocks, and you’re going to do better than letting your money sit in a low-interest savings account.
Make investing a habit. Take a percentage of your after-tax income and apply it towards investing. Your success in investing is based on compound growth.
If you invest a little and leave it alone, it gets static with no growth. Invest a little often and you’ll see the results.
7. Get an Investor Mentor
There isn’t a successful investor who did everything on their own. They had help from someone who knew more about investing than they did.
Join investor groups online and in your area. You’ll get a lot of good investment tips, but you’ll also see people willing to help you.
Ask one of them to mentor you. They can share their experience with you and guide you. You’ll make smarter investments and you’ll grow your money faster than if you tried doing everything yourself.
How to Start Investing
Where should I go for investment advice? What’s the best investment for beginners? These are common questions that people ask when they learn how to start investing.
Hopefully, these investment tips showed you the benefits of investing and how to make wise investment choices. You know how to research stocks, set goals, and choose the right investment vehicles.
If you want more financial advice, head over to the Finance section of this site.