December 24, 2020

New Year, New Opportunities: 6 Tips for Beginner Investors

As the new year approaches quickly, you’re probably thinking of what your resolutions will be in the next chapter.

If investing is part of your plans, then kudos to you. Not only are you only going to be learning new skills, but you’re also setting yourself up for the long run. That said, investing does come with its challenges, and you can expect some bumps along the way, but it can also be lucrative if you take the time to learn how to do it right.

Follow these six tips that are guaranteed to take you on the right path, as well as increase your chances of succeeding.

1. Create Goals and a Timeline 

First and foremost, you need to sit down and come up with some goals, as well as a tentative timeline. To help define your objectives, ask yourself key questions such as:

  • How much do you want to invest?
  • How much do you want to make?
  • Do you want to invest long-term?

Asking yourself these and other similar questions can help define realistic and clear objectives you can achieve in a given timeframe. Think of where you would like to see yourself a few years from now, and jot down the right questions to help you determine how to invest, what to invest in, and when to invest. 

2. Determine The Risk Level You’re Comfortable With 

If you’re green when it comes to investing, there are some key concepts that you need to get familiar with right away. Among them, determining the risk level you’re comfortable with will enable you to make rational—and responsible—decisions.

You might have heard of the saying “big risk, big reward” among successful investors. While that can be true, it isn’t always the case. 

Risk involves you being okay with winning—but also losing. If you feel you wouldn’t be able to stomach watching your investments take a blow, consider going for stocks that involve a lower risk level that might reap smaller earnings but grow steadily.

A great way to determine your risk level is through the allocation of your stocks and bonds. For example, if you consider yourself a more conservative investor, you may want to allocate more investments towards your bonds. More stocks equal more risk. 

3. Pick a Brokerage 

As a new investor, you will need guidance to help you navigate the stock market. With the help of a brokerage firm, you will be able to trade stocks and make decisions that serve your investment goals.   

Brokerage firms spend most of their time studying the market to find ways they can beat it. To provide prospective investors with insight, many firms will research data and reports to help clients make decisions. While some brokerages offer general services, some are specialized and may give tailored recommendations that can allow you to reach your goals. Also, many brokerages are now based online, meaning you can access your investments 24/7.

Before picking a brokerage:

  1. Take the time to shop around.
  2. Get informed about different fees, account types, and features.
  3. Don’t be afraid to ask questions; many new investors get intimidated when they first meet with brokers.

If anything, you should be asking them to help you grow your investments. After all, it’s your money that’s on the line. 

4. Invest in an Investment Tool

Digitalization has allowed many activities to become instantly accessible, among them—investing.

Through an investment tool, you can track your investments, look at their performance, view the market, trade stocks, rebalance your portfolio—and you can do all that with your phone. It’s simple, fast, and easy to manage.   

As a new investor, it’s best if you keep things simple. Consider putting all of your investments (portfolio) in one place rather than using different sites, which can be overwhelming. Investment tools such as Stansberry Investor will allow you to track stocks, bonds, and other investments, all on one platform.

5. Diversify Your Portfolio

You’ve probably heard this before, but here’s a reminder: you need to diversify your investments.

Putting all your eggs in one basket can be tempting, especially if a stock is riding high at the moment. But that high won’t last forever. Stocks eventually fall, and when that happens, you won’t have anything left. By diversifying your investment portfolio, you can make gains even if some stocks drop because you will have bought investments in other areas.

Don’t take unnecessary risks and find ways to diversify your portfolio. Diversification entails looking at different industries, companies (small-cap, mid-cap, and large-cap), as well as markets (domestic and abroad). 

6. Don’t Invest More Than You Can Afford to Lose

You’re eager to start investing, and that’s great! But before you do, make sure you take care of your everyday finances.

With investing, there are no guarantees. You can win big—but also lose big. And risking all of your life savings is not the way to go. It’s also not a good idea to take out a loan for the sake of investing, as it could get you in debt.   

Don’t invest more than you can afford to lose, and take care of the basics first. Start with building an emergency fund (recommended to cover three to six months’ worth of expenses) and pay any outstanding high-interest debt (school, car, credit card). When it comes down to your investments, you want to expect the best—but also prepare for the worst.  

There is No Better Time to Start Than Now

Finally, one of the biggest challenges new investors face is finding the “right time” to get started.

The truth is, there is no right time.    

While you might think that investing is only a numbers game—it’s also about time. The sooner you start, the more time you give yourself to get by the market’s ups and downs, and the better your chances are of getting a good return over your investment. 

Start now, even if you don’t have a lot of money to invest, and make regular contributions. Keep calm, put your money to work for you, and keep learning to set yourself up for success.