Investing can be intimidating to someone who’s new at it. The stock market can look like a roller coaster, and sometimes it is! If you look at the bare bones basics of investing, it’s simply placing your money somewhere it will, hopefully, earn you a profit.
Generally, the longer you keep your money invested, the more earnings you will receive. This is referred to as return on investment. Just be sure you are using money you won’t need. Think of it as play money. Something extra that you put aside to see how you can grow it.
💡 Fun Facts…
| 1) Over the last 20 years, the S&P 500 has had a return of just under 10% |
| 2) The tech sector represents ~28% of the S&P 500 |
| 3) The Stock market was created over 400 years ago! |
Using a Broker
If you’re new to this whole idea of investing, it’s a good idea to seek the advice of a professional financial adviser. These are firms who are experts at investment strategies and financial planning. A full-service broker can help with an array of financial matters, such as stock investments, retirement, and healthcare planning. Just be certain you are clear on what their fees are. After all, the purpose of investing is to earn a profit. You won’t want your broker fees to eat in to that so much, you end up with little or no return.
Discounted Broker Firms
If you’re not someone who has a great deal to invest, and you just want to get your feet wet in the investment waters, there are some discounted broker firms out there which cater to the smaller investor. There are also online broker sites which you can use to set up your plan and basically have it automated by the digital platform the service runs on. Usually, there is no minimum deposit required, and the fees are much lower than the higher-end brokers. This will give you more flexibility in starting out slow and building up to a portfolio that earns you profits on a regular basis.
Online Brokers Compete
Another benefit of using an online broker, is they want your business and will compete to get it. This means they will have lower transaction fees per trade. Some brokers can charge as much as $10.00 per transaction, but, if you shop around, you can find those who will charge as little as $2.00 in order to retain you as a client. Keep in mind, the fees include both buying and selling, so be sure you monitor your transactions and are aware of what your broker is doing with your investments.
Diversifying
A good strategy, and a way to reduce the risks involved with investing, is to have a diversified portfolio. That way, if one of your investment tanks, the whole ship doesn’t go down with it! This means you will make smaller investments in a wider array of opportunities, rather than making a large investment in one place. Mutual funds are also another way to invest with a lower risk because you are grouped with other investors and, therefore, can invest a smaller amount, thereby reducing your risk factor. ETF’s (Exchange-Traded-Funds) are another low-risk investment method because they tend to be very diversified with a larger assortment of stocks and various investments within the fund. This is a lower risk than investing all in one stock because, again, if part of it tanks, the rest won’t necessarily go with it.
Do Your Own Research
If you are new to investing, be sure to do your own research before embarking on your investment journey. Make sure you understand at least the basics and start out slow, so you can build your portfolio and learn as you go through the process. Also, be sure you are using investment money you won’t need elsewhere. Research minimum deposits, transactions fees, broker fees, and any hidden fees that may not be clearly defined. If you use a broker, be sure what their commission will be. You don’t want to use up all of your potential profits paying all of the associated fees. After all, the point is to earn a profit, not lose money!
OPINION
If you have extra money, don’t put it in a savings account (although savings rates have been increasing), but make a better return by investing. Make sure to research any investment you make before committing to it, and diversification is crucial. “Don’t put all your eggs in one basket” is an old saying that rings very true for investing. Do not just invest in one type of vehicle, like stocks, or one industry, like high tech. Instead, buy a variety of stocks across different sectors and invest in different asset class such as stocks, bonds, real estate and index funds.
