Once someone has got savings, debt and budgeting under control, he or she might consider investing their money. When getting started for the first time, a lot of people may feel that investing is a bit overwhelming. The good news is that it is not as difficult as it may seem. Below are some useful investing tips for beginners.
The sooner an individual can start investing, the better. The timing of the market-when to buy and when to sell- may be important. However, the most crucial time in a beginner investor’s life is the time to begin investing. Time happens to be the most vital ingredient in any recipe for financial freedom. Time will determine the amount of money an investor makes in the long run, as well as how much he or she really gets to keep.
Avoid Putting All Investment Eggs in One Basket
When most people are beginning to invest, they do not have a lot of money. A beginner investor may be afraid of buying just one individual stock due to the likelihood of losing all his or her money if that particular stock goes down. This can be avoided by diversification. Even without a lot of money, an investor can diversify by buying either an exchange-traded fund (ETF) or a no-load mutual fund. While an ETF operates just like a stock, in the real sense it is a tracking index. Any of these two is an ideal way of giving diversification to a beginner investor.
It is advisable for a beginner investor to seek investment advice from someone who has the knowledge. Such an individual can find out the various options by speaking to an investment advisor at his or her bank. The advisor can help someone decide whether to invest in a registered retirement savings plan or open a tax-free savings account. Once the beginner investor finds out about the various types of investment accounts and their merits and demerits, then he or she is in a better position to make the appropriate decisions.
Do Dollar Cost Averaging
No one can correctly call the market at the moment it is happening. An investor will never buy at the lowest point, and will never sell at the highest. To be a winner, it is advisable for the investor to do dollar cost averaging. This involves investing a specific dollar amount into an ETF or a no-load mutual fund each month. When the market is up, the investor’s dollars will buy less shares, and vice versa. Over time, the investor will have averaged the shares’ costs, and eventually accumulate more shares.