New to Investing? Simple Guidelines for Success
A financial advisor and friend once told me, “It doesn’t matter how good of job someone has, if they want to acquire wealth in this life, at some point they are going to have to invest in something.” Investing is something most people will do during their lifetime. They may invest in real estate, life insurance, stocks, bonds, mutual funds or a simple 401K. Good investing can bring peace of mind, security and the lifestyle you and your family want to live. On the other hand, poor investing or not investing can cause a lot of personal and family stress. Here are a few basic ideas and tips for someone just beginning his or her portfolio: Start Young Albert Einstein supposedly called compound interest “the eighth wonder of the world.” The younger you start investing, the less you will have to invest to enjoy the same yield. For example, suppose you have a retirement goal of $500,000 and you want to retire at age 65. (For this example, we’ll use an average return of 6%) If you start investing at age 35, you will have to invest $498 each month for 30 years for a total of $179,191 to reach you goal. However if you begin to invest at age 55, you will have to invest $3,051 each month, or a total of $366,123 to reach your retirement goal. Money invested while you are young yields a much higher return. Buy Safe Investments to Start Entering the world of investments can be an overwhelming and intimidating experience. There is so much information, investment strategies and investment types that it would take a lifetime to learn all of them, and by then, it’s too late. Start with some simple, safe investments while you continue to learn. Not only will you be able to start investing earlier in life, but you will also gain confidence as you watch your portfolio grow. Use a Broker With the Internet and online stock broking service, it’s easy to buy and sell securities without ever talking to real person. However, when you’re just getting started, it’s a good idea to meet with a broker. Ask friends or family to refer a good, honest broker. Brokers can explain things clearly, will introduce you to investing and guide you in the right direction. They can help you set up accounts like an IRA or education savings plan. They can even set up an automatic investment plan so contributions will automatically withdraw from your banking account each month. This is also good for someone who has a hard time dedicating money to investing. Become Educated We live in a world of information and there is a wealth of information about investing. A lot can be learned from credible websites, you can find books at your local library, join an online investment group, talk to your peers and even sign up for free investing seminars. Lack of knowledge should never be a reason not to invest. Practice Online Investing Before you jump head first into the stock market, you should spend some time testing the water. There a couple of ways you can do this. You can start by investing and trading penny stocks. Penny stocks give you experience, let you use investment tools and make decisions based on news without a large initial investment. However, some have deemed penny stocks riskier, but they are a good way to get your feet wet. You can also use a trading simulation service. You can invest virtual money in a virtual stock market that is based on the real stock market. You will be able to learn to use tools, become familiar with the different types of investments and weigh your risk with no real danger of losing your money. Invest for Retirement Retirement is the #1 reason people invest. With a depleting social security system, people are relying more and more on personal investments to insure the lifestyle they want in the later years. Individual retirement accounts (IRAs) and Roth IRAs are account options for retirement. You can see a local investment agent or research the topic on your own to decide which is best for you. Invest for Higher Education We not only invest for our own benefit but also for that of our family. An education fund that is started at a child’s birth has a lot of potential. Even if only a small amount is contributed each month. This is also a great way to introduce your children to investing. Resources LifeTips. (2006). Free Investing Advice – Investing Tips – Investing Strategies. from http://investing.lifetips.com/ (n.d.). Compound Interest...The 8th Wonder of the World. from http://www.money-management-wisdom.com/compound_interest.html Richard A. (2006). from http://www.buyupside.com/retirementinvesting/index.htm Cristopher Fowers
Cristopher Fowers is a Writer/Reviewer for TopTenREVIEWS.com TopTenREVIEWS features expert reviews for technology and entertainment products and services. For more information and an in-depth review on online stock brokers, see the TopTenReviews Online Stock Trading Review Site. We do the research so you don’t have to™. |
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