4 Tips for First-Time Investors

If you have been doing well with saving, you may be ready to take the next step and invest. Many people would like to begin investing but are unsure how to get started. Here are a few things to consider as you get the ball rolling and invest your first bit of money.

Choose How To Manage Investments

A good place to start is by deciding what method of investing works for you. Will you be managing your investments on your own, or would you prefer the assistance of a robo-advisor or financial advisor? If you are completely new to investing and do not have access to outside advice or resources, a financial advisor is likely your best bet. An advisor can walk you through every step of the process from managing investments to handling taxes. Nevertheless, for the true DIY enthusiast, it is entirely possible to manage your investment portfolio yourself. Self-management may be riskier and more challenging, but it has the added benefit of being the most affordable option. There are a variety of online resources to assist you in managing your portfolio on your own.

Determine Investment Goals

Many people want to know the best ways to invest money right off the bat, but the truth is that the best way to invest depends on your overall investment goals. If you will likely need the money within 5 years, it is not a good idea to invest in something like the stock market. Instead, a better plan is to put your money in a certificate of deposit CD or a high-yield savings account. CDs allow you to deposit money for a specified length of time in exchange for a guaranteed return on both principal and interest when the CD reaches its maturity date. CDs are good for investments of three to five years but they do not allow you to access the invested funds during that time. If you want access to your money at any time, you may prefer a high-yield savings account instead. Most short-term investment options are relatively low-risk, but this also means they earn returns that are more modest.

Understand Risk

A key step in investing is determining what level of risk you are willing to accept. While some people are risk takers and others are not, it is good to remember that, generally, higher risk equals the potential for higher reward. Whether your investments tend toward being high-risk or not, diversification is a critical tool for minimizing your chances of a catastrophic loss. You want your investments spread across several types and categories. Check out online tips for properly diversifying your portfolio, and talk to an advisor to further understand the levels of risk associated with various investments.

Automate Investments

Automated investments are great for staying on track with your investment plan. Setting up an automated withdrawal is easy. You can determine what bank account you want the withdrawal to come from and choose a pre-determined amount to be set aside into designated investments each month. This ensures that you regularly contribute to your investments and alleviates the burden of having to remember to do so.

When it comes to investing, you do not want to delay. With guidance from online resources and financial advisors, getting started is a simple and painless process.

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