The Beginners Guide to Investing

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:

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

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

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.

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