Are you looking to put away money for your children’s college or begin saving for retirement but are unsure how to begin? If you are interested in investing financially but have not started yet, here are some tips to help you launch your investment journey.
Decide why you are investing
First thing’s first – why are you investing? There are many reasons to begin investing, and there are many options in which to invest your money. It is crucial to understand why you want to invest so that you can come up with an appropriate strategy. If you are saving for a down payment for a house, you might plan to withdraw funds after a few years. If you are saving for retirement, you may want to choose investment options for the long-term. Ensure you set suitable goals to help you achieve your plan.
Diversify your portfolio
Once you have established your goals and started investing money into your various options (stocks, bonds, mutual funds, certificates of deposits or other opportunities), ensure that your investments are diversified. Diversification is the action of mixing different types of investments within your investment portfolio. By diversifying, you are attempting to spread out your risk. If you have all of your money invested in one kind of industry, or even all in one country, and a bad event or incident occurs, all of your money could be lost. But by spreading out the types of industries, countries, options, you may lower the chance of one event wiping out your hard work. It is not a guarantee, but diversification may help to reduce your risk.
Control your emotions
If an event does happen, and the stock market looks more like a roller coaster or down escalator, stay calm. Do not panic or make rash decisions. Emotional investors make emotional decisions. Think logically. Do not pull all of your money out at once. To avoid feeling out of control with the market, put an exit strategy in place when you first invest. This way, you will not make decisions based solely on emotion.
Investing can be emotional and personal, even when you plan accordingly and do your best to remain emotionally steady. New investors tend to follow the market very carefully and can obsess over the fluctuations. Do your best to take a step back from the minute to minute and let the markets take their course.
Investing can help grow your assets so you may be able to achieve goals such as sending your children to college and retiring comfortably. Start with small investments today and grow them as your knowledge improves. Also, make a habit of investing some of your money each paycheck. Consult a financial advisor to help you build your investments further and help you meet your financial goals.
Claudia Mollerup-Madsen is a Financial Advisor with the Wealth Management Division of Morgan Stanley in Houston.