Investing is often made out to be difficult, requiring special knowledge, a high-end financial advisor, or costing a lot of money.
However, the foundation of investing is simple and can be learned by anyone. Don’t let misconceptions about investing prevent you from reaching your goals. The greatest risk in investing is not that you’ll lose money, it’s that you’ll miss out on the gains.
Why Waiting Might Be the Worst Decision
You read or hear about people getting lucky and can invest at the “perfect time.” What you don’t hear about are the people who have lost thousands of dollars waiting for that “perfect time.” The reality is that there is no “perfect time” to start investing, and the longer you wait, the more you are sure to lose. Perhaps one of the greatest benefits of starting to invest early is the compounding of interest. As your interest earns interest, your principal grows exponentially. When you start investing early, your money has the most time to grow.
Getting Started with the Basics
While many of the most successful investors have extensive financial experience before they begin, it is not a prerequisite for becoming a successful investor. What is required is a desire to learn from the start.
As a new investor, it is wise to consider starting with a lower-risk, more easily understood form of investment. By investing in a Fund rather than individual shares, you gain diversification, which can often be less risky than buying individual shares.
Smart investing begins with a clear sense of your investment goals. Are you saving for retirement in five years? For a down payment on a house in two? To build wealth over the long-term? Of course, you would like to maximize your returns, but without some sense of what you are trying to achieve, it is hard to make informed investment decisions. The bottom line is this: if you don’t know what you are doing, just start doing it. The investment process will help you clarify your goals.
Debt Consolidation: A Necessary Step Before You Invest
It’s hard to make back some of the money you’re paying on other high-interest-rate debt. If you’re earning less on your investments than you are paying in interest, then you are probably losing money. Paying off high-interest-rate debt can be one of the smartest investments you make.
By consolidating your debt, lowering interest rates, and reducing monthly payments, debt consolidation can put you in control of your finances, paving the way for creating wealth.
There are many debt consolidation options to try, and the best approach depends on your situation and preferences. Borrowing money with a personal loan is one option, and when you have good credit, you may be able to borrow at a lower interest rate than you are currently paying on high-interest credit cards, other debt, or loans. This can save you money on interest costs by reducing your monthly payments enough to leave more cash available to save for retirement.
Another option you might look into is a balance transfer credit card. This would involve moving your high-interest-rate debt to a new credit card with a 0% introductory interest rate for 12-18 months. You would then try to pay off the debt during that time, without incurring any interest. Be sure to read the fine print on any balance transfer credit card, and look for a low balance transfer fee. Also, be sure you can pay off the debt before the low-interest rate expires.
Pay off debt so you can invest in your future. First tackle your high-interest debt, and then you can invest in your future by investing in yourself. Both managing your debt and growing your wealth are important, and striking a balance between the two is crucial to your long-term financial success.
Investment Strategies for Beginners
Once you are familiar with the basics of investing, you will realize that making money through investing is far easier and brings greater returns than paying off the bad debt you worked so hard to pay off. The potential is unlimited, but only if you make smart decisions.
New investors looking to get started might consider low-risk investments. These are especially available as index funds and ETFs, which can provide instant diversification. Unlike stocks, these funds do not allow you to invest in individual companies; instead, they track an index such as the S&P 500, giving you instant exposure to hundreds of companies and a solid, low-risk base to start with.
Invest with robo-advisors. A robo-advisor is an automated online financial adviser that offers pre-built investment portfolios and invests in them on your behalf. Decisions about the investment mix are made based on your risk tolerance and your investment goals. Robo-advisors are a good option for someone who wants to put their money to work but doesn’t want to personally be involved in the investment process. The robo-adviser will manage your money and automatically rebalance your portfolio as needed.
The Power of Habit in Investing
For an early-stage investor, one of the best habits to get into is regularly investing in shares. Even a small amount every month can add up to a surprising amount over time. Most investors find it easier to invest regularly, either through an app or via their bank, so that they’re always investing, even when they haven’t really thought about it.
One common misconception about investing is that you need to start with a significant amount of money sitting around idle. However, the key to successful investing is to make consistent contributions. Therefore, instead of waiting for an extra $950 to reach the mythical threshold of investing with $1,000, put the $50 you already have to work today. The returns will likely far outweigh the patience it takes to save more.
Investing Myths to Ditch Right Now
There are many myths that prevent people from investing, often stemming from the misconception that large sums of money are required to get started. However, with many options available, it’s possible to start investing with as little as $5 or $10.
While it is true that there is an element of risk involved with any investment and, unfortunately, none of us can guarantee that the value of our investments will increase, what we can do is manage the level of risk that we are prepared to take. While it is possible to learn the rules of diversification, the real key to success is patience. Stock market prices can be unpredictable in the short term, but over the long term, shares have always increased in value.
Conclusion: Start Today
There is no better time to start investing than right now. Don’t waste your time looking for the best time to start or worrying that you will learn more later. The truth is, you will always be able to learn more, and the fact is, you will never be rich if you wait until you have enough money to start investing.
Investing in shares can be an exciting but often daunting prospect for new investors. We recommend starting by learning how to invest, paying off debt, and developing good money habits. After achieving these key objectives, you can start generating returns on your money – whether it be $10 per month or $1,000. Invest for your future today.
