5 Tips to Start Investing
Watching the stock market hit record highs in April, you’ve probably been asking, “How can I start investing?” This is a common question when the markets are good, and as we leave the financial turmoil of the pandemic, you probably realize that saving for your retirement is essential to financial stability in your golden years.
You’ve taken the first step in researching how to get started with investing, and now it’s time to dig a little deeper.
Take a look at these 5 tips we put together to help you start investing sooner rather than later.
1. Getting started with investing
Start investing now
Many people ask, “How much money do you need to start investing?” And the simple answer is: It’s not about how much you need to start investing but about when you start investing. The earlier you start investing, the higher returns you’re likely to see down the road.
Set realistic investment goals
Setting realistic goals for your investments can help you determine your investment strategy and begin your market research. Think of your long-term investments and your short-term investments. All markets have their peaks and valleys, and as you do your research, you’ll learn that some markets are more volatile than others.
Volatility isn’t necessarily a reason to avoid a market, but volatile markets should be approached with caution, and you should always diversify so that you spread your investments across several assets and asset classes.
If you want to put your entire savings into one company, you risk losing them all, depending on how that company performs. Additionally, it’s not realistic to put your entire life savings into the market and expect your investments to triple in three days — this happens rarely, and the more realistic approach is to expect your portfolio to grow slowly over time
2. Your financial future is in your own hands
Even if you have a financial advisor, you are the one who controls your money. While having a financial advisor is a great way to take the stress of investing off your hands, financial advisors have their own biases and might steer you away from great investment opportunities that aren’t in their best interests. Financial advisors are typically paid on a commission basis, which can affect their decision-making.
That’s why you have to do your research and learn about each market. Of course, a financial firm that deals solely in the stock market is going to tell you not to diversify outside of the stock market … after all, there are so many great ways to diversify within the stock market.
However, if you tell that same financial advisor that you want to try your hand in the real estate market, they might give you a list or reasons not to: the stock market has done well for you; the real estate market crashed 13 years ago; there are better ways to invest your money. All of these should be red flags for you.
In these cases, read what the experts are saying and listen to your gut. Diversification is essential to a healthy portfolio, but diversifying outside the stock market is a great way to insure your financial future against market fluctuations, bursting bubbles, and crises.
3. Diversify, diversify, diversify
In your research, there is no doubt you’ve come across the phrase “diversify your portfolio” over and over again. But what does it mean? Diversifying your portfolio simply means don’t put all of your eggs in one basket. You don’t want to put all of your money into a single company’s stocks, a single industry, or a single asset class.
For example, you don’t want to focus specifically on the tech sector of the stock market. Branch out into different sectors, such as energy, materials, and health care.
In addition to diversifying within the stock market, your investment goals should include investments outside of the stock market. Diversifying outside of the market is a great way to hedge against market crises and inflation. There are several investment opportunities outside of the market, including precious metals.
Take a look at this graph, which shows the performance of IRAs invested solely in stocks, compared to IRAs that are diversified outside of the stock market with precious metals IRAs.
As you can see, IRAs diversified with gold can grow nearly twice as much as an IRA that is not diversified.
4. Learn how to read market projections
While experts aren’t always right when it comes to market projections, they do have valuable insights. Learning about market projections and finding an expert who makes sense but doesn’t make incredible claims is the first step to learning how to read market projections and invest accordingly.
As stated above, your financial future is in your hands, so it’s important to learn everything you can about the various markets in order to get the most out of your investments and protect your financial future.
5. Don’t be afraid to change your investment strategy
Even if you set strong investment goals when you started investing, you may find that factors in your life have changed those goals. You may have gotten a promotion that allows you to invest even more money. Perhaps you were offered an employer-matched 401(k). Whatever the case may be, you will most likely find that your goals will change as your life and lifestyle change. For example, as you reach retirement age, you may find that investing in less risky assets that work as a store of wealth, such as precious metals, is the best way to secure your retirement.
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