Investing is a scary word right now. An unstable stock market, decreased value of the dollar, and political unrest all around the world make investing a big risk. Do you still want to attempt to be part of the solution? Then take a couple of risks and consider investing in stocks.
But how do you start? What can you do to be part of the solution without plunging into unknown waters unawares? Today, we’re going to look at three things that all wise investors take into account when planning their investments.
- “Don’t put all your eggs in one basket.” This is probably the age-old investment tip. Basically, it means that you shouldn’t put every dollar that you invest into one stock or even the same category or stocks. Heck, it means you shouldn’t put it all in the stock market, either! This is referred to as diversification and its one of the best strategies out there to help your portfolio have the least amount of risk. Many experts suggest that you diversify between standard savings accounts, the stock market, and bonds. How much you put in each of these three things will depend on how much risk you want to take; the more you have in “safe” investments (savings accounts and bonds which cannot lose money), the less overall risk you have.
- Do some research, both before you invest and while you have money in the stock market. Don’t just go on your whims. Get out there, read about the companies you’re considering putting money into, see what their patterns have been for the last year, and compare them to other companies in the same industries. No, eeny-meenie-miney-mo does not work. Please don’t try it; the results will not be what you’re looking for. After you put money into stock, keep an eye on it. It’s not like a crock pot; you cannot ‘set it and forget it.’ Continue to read up on the industries you’ve invested in and on the market as a whole. Staying “in the know” will help in further reducing any risk you have.
- Don’t play it too safe. Now, these first two tips were about risk and reducing it. But any knowledgeable investor knows that there has to be some risk involved in your portfolio or your profit will be minimal. If your intention is just to set some money aside that you can come back to later with accrued interest, then this doesn’t apply. But if you want to be successful and get ahead, take a couple risks. Don’t be stupid with taking risks, but be willing to lose a little to potentially gain a lot.
This definitely isn’t everything that you need to know in order to invest successfully, but it’s a great start. What other tips and hints do you have to start investing? Have you invested, or are you too nervous to take the leap? Share some thoughts in the comments, have a great week, and we’ll see you back here next week!