The Beginners Guide To Investing

The Beginners Guide to Investing

Three simple steps to get you investing successfully.

How do I invest? Where do I start? If you are new to investing, you probably are asking these questions and more. Many people wonder how they can invest, but they don't know where to get started.

Well, the best place to start is at the beginning. You can start investing the right way today.

I've created The Beginners Guide to Investing to teach you how to invest correctly. In order to invest successfully, you should do three things:

Understand your financial goals.
Have an investment plan.
Pay attention to your money.

These are the first steps you should learn before you invest. I realize these things seem like common sense, but you would be surprised at how many people forget to do them.

The three steps listed on this page will help you outline your financial goals, create an investment plan, and track your performance. If you're brand new to investing, keep reading. The Beginners Guide to Investing will get you get you on the right path quickly. This guide is designed for people who have a little money to invest and have not invested before.

So sit back, grab a cup of coffee, and get ready to learn how to invest the right way.

Step 1: Outline Your Goals

It is a common investment mistake for investors to have no idea why they are investing. So, you should ask yourself...

Why are you investing?

People save and invest to improve their quality of life. However, it is easy to make mistakes that can cause stress and cost you money. You can avoid those mistakes and keep your investment on track by outlining your financial goals.

Do you know why you are investing? What are you going to do with your money? What is most important in your life?

"Making money" is not a good enough reason to invest. How do you see yourself spending your money in a year? In the next five years? Ten years? If you can clearly explain your goals, you have taken the first step toward successful investing.

With that in mind, write down your financial goal. One simple sentence is all you need. For example, you can write “buy a home”, “pay for college,” “start a business,” or “retire as a millionaire!”

Next, write down the amount of money you think you will need to accomplish your goals.

Don’t worry about trying to fit in every little cost. You can always revisit your target later when you check your performance. Focus on your goal, and try to write down a target number.

This number will be different depending on your goal. For example, maybe you’re buying a $100,000 home, you may want to save $10,000 for a down payment. Maybe you need $5,000 to start a business or $50,000 to pay for college. If you don’t have much money to invest, you can make up for it by investing over a long period of time.

Finally, consider the importance of your investment goals. How important is your retirement, your kid's college tuition, or your down payment on a house? The importance of your investment will give you an idea of your risk level. This will help you write your investment plan in the next step.

Ask yourself if you are ready to invest before you move on. Be honest with yourself. Make sure you can commit enough money and time to investing.

You should also consider the risks involved with investing. Every investment has risks, and it is very important that you understand and accept them before you invest. Would you be better off paying off your debt? Can you afford to just save your money rather than invest it?

If you don't want to take any risks, you can stop right here. There is nothing wrong with simply saving your money.

If you decide to stay committed and motivated toward achieving your investment goals, you are ready to move on. Your goals will help you make the best investment decisions and develop a successful investment plan, which is our next topic.

Step 2: Make a Plan

Every investor needs a plan. In my experience, many investors fail because they do not have one.

Your investment plan is the first step toward achieving your goals. When you write an investment plan, it should be simple. The final plan should be an easy guide that you can follow as you invest. Anyone that reads it should be able to tell exactly what you are doing. If an eight year-old can understand it, you are on the right track.

Now that you are ready, let's get started on your plan.

First, consider your risk tolerance. This will save you time and stress in the long run. Your behavior is more important than the behavior of the financial market. Some investors worry about having a steady amount of income, and some investors enjoy the thrill of finding a great opportunity. You can make a better decision about your risk if you understand what is important to you.

Most people fall between the two extremes on the risk spectrum.

Your asset allocation also has a huge impact on your investment. Try to set your allocation up with a few different investments that you are comfortable with. Investing in more that one asset will also keep you diversified, which keeps your risk low.

You should be able to decide between a conservative, moderate, or aggressive strategy based on your goals. If things are not making sense to you, go back and re-read what you have written down. Don't be afraid to brainstorm further on your financial goals as you develop your plan.

After you have decided on your asset allocation, write it down.

If you feel comfortable with your risk level and your asset allocation, you are ready to start looking for investments.

Most of this site is dedicated to finding the best investments. You can start with Mutual Fund Investing for Dummies and where to start your research. There are also plenty of other helpful articles here, so I'm sure you will find something that will help you.

Now it's finally time to open your accounts and invest your money.

In order to invest your money, you will need a broker. Investing through an online broker is an easy way to get started. I recommend Zecco for online investing. Zecco offers great pricing on mutual funds, no account minimum, live quotes, and is also protected and insured against loss by the SIPC.

Don't invest unless you feel comfortable with your broker and your investments. If you don't understand an investment, it is usually best to stay away from it. Or, you can start small and add more money when you feel comfortable. Keep looking and learn more as you go forward with your investment plan.

I'm confident that you will eventually learn how to make the best investment decisions for yourself.

Step 3: Track Your Performance

You are finally invested. Congratulations!

After a while, you will begin to wonder how your investments are doing...

This last step in The Beginners Guide to Investing will take you through the process of evaluating your own performance. In order to stay on track, you should check your investments regularly. Hopefully all your hard work and planning is starting to pay off. Maybe you are starting to earn a little bit of money.

Are you getting the return you expected? How is your investment performing compared to other similar investments? Are you on your way to achieving your goal?

Don't just "set it and forget it." It is important to check your investments regularly to make sure they are still working for you. It is usually easier to fix problems early on, rather than waiting until you've lost a lot of money.

There are two very easy ways to track your performance, using either paper statements or internet tools.

Most people prefer one method over the other. It's up to you which method to use. Your records are usually provided to you free of charge. Just be sure that you keep your records in a secure place and keep your passwords safe.

Make sure to check your performance weekly or monthly. Try to determine how much money you are earning or losing, and write down the results.

During each re-evalutation, you can consider making any changes in your investment account. Resist the urge to make too many changes; you don’t need to mess around with your investments every day. If you are worrying about your investment each day, you may have taken on too much risk. Too much tinkering can also hurt your long-term returns.

If your investment isn’t doing what you had hoped, find out why. Research your investments online, ask other investors, or contact the investment company. Depending on your conclusions, you might decide to stay on course or make a few changes. Be careful, though. Fear alone is not a good reason to sell your investment.

Re-evaluating your entire investment plan every few months is crucial to your success. I like to do this quarterly. You can constantly improve your plan by going back through The Beginners Guide To Investing from step one. Try to build on your own experience and improve, so you always move closer to your goal.

Moving Forward

Now you understand how to outline your goals, make a plan, and track your investments. If you are feeling confident in your investment plan, you are on the path to investing like a professional.

The work doesn't stop here, though.

The Beginners Guide to Investing will put you on the right track, but ultimately it’s up to you to make the decisions. You need to take complete responsibility for your own financial decisions. This means that once you've been presented with all the information, only you can decide what is best for your financial situation.

If you are not willing to be honest with yourself and take your finances seriously, then you should not be investing.

You can ask for help. Don’t hesitate to ask other investors what they think of your investment plan. Most people know at least one person that makes good financial decisions. It never hurts to get a second or third opinion.

Now that you are investing, you may want to read Mutual Fund Investing for Dummies ... and Everyone Else. Whether you are a dummy or not, you will learn how to manage your risk, save money, and earn great returns by investing in mutual funds.

Keep learning and build up your investment knowledge. Your experience will ultimately determine your success.

Return from The Beginners Guide to Investing back to The Home Page.

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