As a new investor, you probably have a lot of questions. For example, when should you start your investing process? What should you try to invest in? When should you seek or avoid investing advice?
You may also wonder why investing has to be so complicated. While there may be some tough questions to answer, the fact is, with the right advice from professionals like Patrick Chung of Xfund and the tips below, you can be on your way to making smart investment decisions quickly.
Start the Process Now
One of the main barriers to investing money when you first get started is just that – getting started. The answer of when to start this process is simple and straightforward – today. Don’t try to wait for that “perfect time” to get into the investment market. Start right away and then continue to add to the investments you have made. As a new investor, you need to start with the knowledge that your initial investment will likely go down. It would help if you understood that the investments you make might lose money from time to time. Also, when this happens, it does not mean you have done something wrong. In most cases, it means the exact opposite. You should add more to your investment while it is down.
Don’t Get Scared by What You Find Online or in the News
One of the best pieces of advice you can listen to is this – you need to understand that you (as the investor) and the media have completely different agendas. The goal of the media is to get more views. In many cases, this is achieved by sensationalizing the truth. As an investor, your goal should be to work to grow your money consistently over time. This is done by focusing on what you can control, including taxes, costs, risk, and the time horizon.
There is plenty of research showing that the less you adjust and “mess” with your investment portfolio, the better you will be in the long term. This means you should not try to time the market. If you read a headline that seems scary, try to stay focused on your goals. By looking forward to your investment goals, you can avoid falling into the media’s trap.
Focus on the Savings Percentage
Another common issue that seems to mislead some new investors is the poor performance of their portfolio. You may begin to doubt the investment decisions you have made if you notice your portfolio has begun to decline. However, declines in the stock market are completely natural. Rather than just focusing on the performance of your portfolio, focus on the savings percentage. As a long-term investor, this is one of the main factors that will determine if you are successful. There is no way to control how your investments are performing; however, you can stay in control of the amount you are saving. If you focus on increasing or maintaining your current savings rate, you will be in a position that eventually leads to success.
Set Goals for Your Investments
One of the first steps you need to take when it comes to any investment strategy is to know what your investment goal is. Write down all your goals; this includes short-term goals, medium-term goals, and long-term goals. Put a time frame on each one of these, along with a dollar figure. For example, you could make a short-term goal of taking a vacation out of the country next year. A medium-term goal could be saving enough for a down payment on a house in around five years. When you create tangible goals, it will give you the motivation necessary to continue saving and continue investing. It will also help you fully understand how you need to invest to meet the goals you have set.
Determine Your Time Horizon with the Goals You Set
What you invest will go a long way when it comes to determining your time horizon. The time horizon refers to the amount of time you have before you plan to actually use the money you have been investing. This is one thing that will determine how much risk you can take.
The longer your time horizon is, the more you will be able to risk. For example, if you have a time horizon of a decade (or longer), you can choose stocks. However, for a five- or 10-year time horizon, stock exposure should be avoided for the most part. If you have a time horizon of under five years, choose cash or cash alternatives.
With the information here, you should be ready to begin your investment efforts. While it can still be intimidating at first, if you take things slow and take the right steps, you will find that your investment efforts provide the desired results. Being informed is the best way to be successful when it comes to investing.