investment tips

Only 55% of Americans report owning stock. This is a harrowing statistic because investing in the stock market is one of the most significant ways to grow your wealth. That said, learning about the nuances of the stock market can feel overwhelming! Most people don’t know where to begin, and they’re cautious about losing their hard-earned money. Therefore, they avoid investing altogether. We’re here to help simplify your strategy. Let’s get into the top investment tips you need to know to get started.

1. Build An Emergency Fund First

Before you even begin to dip your toes into the world of investing, you need to make sure that you are protecting yourself in case of emergencies. Because when it comes to emergencies, cash is king.

Most financial experts recommend having about 3-6 months worth of savings in an emergency fund. If you have dependents, you might want to bump this figure up to one year.

Remember to earmark this cash only for emergencies (i.e., medical expenses, covering bills after losing a job). If you don’t touch it, great! Someday, you will! And when you do need to use it, aim to replenish the funds as quickly as possible.

2. Identify Your Investing Goals

Are you looking to save for retirement? Do you want to send your child to college one day? Your goals will help orient your retirement needs.

Long-term goals allow you to take greater risks. This philosophy aligns with the historical indication that the stock market always goes up over time- even if there are ebbs and flows over the years. If you have short-term goals, you will need a more conservative approach to manage those funds.

3. Take Advantage Of Free Employer Money

The average employer 401k match is currently 4.7%. If your employer offers a match, you should do whatever you can to invest at least up until this match. It’s basically free money.

Over the long-term, the money accrued from this match compounds. That means that your money keeps growing without you even touching it.

Of course, if you can afford to add more to your 401(k), it’s advantageous to do so. The money grows tax-free, and the contributions lower your taxable income.

4. Choose The Right Broker

Nowadays, there is no shortage of brokerage firms eager to help you get started on your investing needs. That said, it’s up to you to outweigh the different financial institutions to determine what’s best for your needs.

There are two types of brokers. Full-service brokers provide individualized advice and may manage your assets for you. Discount brokers, on the other hand, tend to follow more of a DIY approach.

When choosing the best option, you should consider costs and fees (including the minimum balance for setting up an account). You also want to understand the company’s fee structures.

5. Aim To Keep Fees Low

If you’re just starting with investing, you should aim to focus on investing in funds with low expense ratios. While 0.5 may not seem that much different from 0.1, the variance can cost you thousands over the long run.

Of course, you want to compare fees with the stock’s progress. While the past is no foolproof indication of future success, many investors prefer to choose funds that have historically performed well.

6. Anticipate Slowdowns and Losses

If you are investing in the long run, you need to have some risk tolerance. If you’re someone who is going to pull from the market the moment it dips, you need to reconsider your values.

Yes, it can feel scary to watch your money plummet in a market downturn. It can feel incredibly challenging to just “sit it out.” With that in mind, research continues to show that people who hold their money during the fluctuations outperform those who don’t.

7. Consider Alternatives

Your asset allocation is one of the most significant factors in determining your long-term success. Most experts advise against keeping all your financial eggs in one basket. In other words, it’s rarely a good idea to handpick just one or two stocks.

Instead, you want a blend of different kinds of assets. This strategy can help safeguard your money when the market inevitably declines. Some popular, alternative investments include:

  • real estate
  • silver and gold
  • peer-to-peer lending
  • cryptocurrency
  • equity crowdfunding
  • business ownership

8. Start As Early As You Can

You’re never “too young” to invest. In fact, the earlier you start, the better your money will perform. As mentioned, compound interest is a beautiful thing.

People who invest at a young age don’t have to contribute nearly as much to their accounts as people who start later in life. And don’t get caught up in the numbers game. Even being able to stash away $100 a month can make an impressive impact.

9. Study and Reassess Your Portfolio

Some people invest their money with a “set-it-and-forget-it” mentality. They don’t touch the money, and they’re happy with that laidback approach.

However, it’s usually smart to keep an eye on how your investments are performing. What works today may not be as advantageous in a year or so. Depending on how your goals evolve, you may need to reallocate your investments from time to time.

Final Thoughts On The Best Investment Tips

At the end of the day, you are responsible for your financial success. Nobody is going to care more about your own money than you.

These investment tips should help you feel more confident in moving forward. Are you interested in learning more about different brokers and investment options? Click here to learn more about us and what we offer.