This article is brought to you by Bankrate and created by the In The Know sales team. If you decide to purchase products through the links below, we may receive a commission. Prices and availability are subject to change.
If you’re like most people, you probably think that investing is something only people with a lot of money can do. But here’s the truth: anyone can invest. Ready to marvel even more? Anyone with disposable monthly income should invest. Yes, even if you don’t make a lot of money, and yes, even if you still pay off your student loans. Investing is a great long-term savings option that pays big rewards if you are patient and smart about your investments.
Despite what you see in movies and on TV, you don’t have to be (or even have) a stockbroker to invest. In fact, it’s easier than ever to go it alone, thanks to platforms like Charles Schwab, E-Trade and Robin Hood. These sites (and others) offer no-cost or low-cost options for individual investors to start building a portfolio. Best of all, some also give you access to financial planners who can provide investment advice and help answer questions along your investment journey.
1. Think about your investment goals. First, Baker encourages people new to investing to ask themselves a simple question before getting started: How quickly are you looking to get a return on your money? Or, how soon will you need the money you have invested?
If the answer is sooner rather than later, Baker advises you to avoid investing in stocks and putting your money in a money market mutual fund or high yield savings account. No, these options won’t offer as high a return as the investment, but you will see consistent increases over time. Most importantly, all of your money will still be there if you need it quickly.
On the other hand, if you don’t anticipate needing the money anytime soon, then investing is a good option. Successful investing often requires a long-term approach and patience, as the market can fluctuate. Over time, however, it often yields positive results for many investors.
Another option? Do both. It is not a situation of choice. You can certainly put some of your disposable income into a money market mutual fund or high yield savings account and then use some of it to invest.
2. Consider how much you can afford to invest. If after paying all of your bills and putting money aside in a savings account, you still have money left, so much the better. You are in the perfect position to start saving. While Baker says the choice of how much to invest depends on your personal expenses, he adds that investing 10% of your income is a great place to start if you can.
This last element is important, however. Not everyone is able to invest 10%, and that’s okay. When you start out, only invest how much and when you can. What you shouldn’t be doing is missing out on big bill payments or slacking off your traditional savings just to invest more.
Another investment no-no? Prioritize your investments to the repayment of your debts. This is especially true when you look at interest rates. While the money you invest can generate a 7-8% return, the interest rates on debt are often much higher than that. If this is the case with the debt you carry, Baker advises to prioritize repay your loans before putting a lot of money on the stock market.
3. Choose the platform that’s right for you. With the growing popularity of investing, there are many online brokerage platforms and different platforms that individual investors can choose from. Some of the most famous and popular are Marcus Invest, SOFI, Tassels and Robin Hood. Here are some questions to ask to decide which one is right for you:
Are there any account minimums? According to Baker, many online brokers available to individual investors new to investing do not have a minimum account, so most people can easily get started with the amount of money they have saved.
What are the account fees? You’ll want to know if there are any fees associated with opening an account with the online broker you’re interested in. Plus, find out if he’s charging you for transactions or new investments. Baker says that platforms like Charles Schwab, E-Trade and Robin Hood âAll of them offer commission-free exchanges which is great because you don’t pay a lot of fees in the end. “
Do they offer fractional shares? Many brokerages now also offer fractional shares, which Baker says is great if you don’t have enough money to buy a whole share of a popular stock like Amazon or Alphabet.
What investment research do you have as a member? Chances are you will have some questions when you start investing. Some online brokers provide investment research for their members, which can be helpful when you are just starting out.
What else do they offer? Some brokerage firms offer other services such as tax planning or access to financial advisers. Others offer different types of accounts like retirement that might be of interest.
If you still need help choosing the best online broker for you, check out Bankrate Reviews of all the major players.
4. Start with a diversified spread. Rather than trying to buy stocks of specific companies that are buzzing right now, Baker advises new investors to start their journey with a more diversified spread. Focusing too much on individual businesses often means that you will need to have an in-depth knowledge of that business and its long-term strategy or plans. Most first-time investors don’t have access to this kind of information, or the time it takes to acquire it, which is why Baker says it’s best to invest your money in an S&P 500 index fund first. will give you a diversified portfolio of US stocks at a very low cost, and which can be purchased through a mutual fund or an exchange-traded fund (ETF), âsays Baker.
5. Know when to verify your investments. If you follow the more traditional investing strategy above, where you put savings into a diversified portfolio every month, you really don’t need to check your portfolio every day or even every week. Because this is a long term strategy, a monthly check is more than enough.
âIf you take a more commercial approach where you own shares of a sole proprietorship, you will want to stay on top of how those companies are performing, how they are doing, and you will need to keep a closer eye on those investments,â says Baker.
6. Avoid these common mistakes. When you are finally ready to start investing, it can feel exciting, as if you are finally getting into the heart of the action. But don’t take the lead, Baker warns. Here are three of the worst things you can do when you start investing.
Don’t trade often. âA lot of trading activities are not the path to long-term investment success,â Baker said.
Don’t obsessively check your account. âIf you’ve been investing for the long haul, there’s really no need to check your portfolio every day,â Baker reiterates.
Don’t get too emotional. âEmotion is another enemy of successful investing,â says Baker. âNo one likes to see their portfolio go down, but stocks are inherently volatile and it is inevitable that they will go down sometimes. People have to keep an eye on their long term goals, âhe adds.
For more useful investment advice, visit Bankrate.com/investment.
The post office Investing 101: Here’s What You Need To Know To Get Started, According To An Expert appeared first on Aware.