Reading about investment strategies and hearing financial experts talk about stocks and bonds can be overwhelming for a new investor. Some people think you need to have a wealth of financial knowledge to set yourself up for investment success, but the truth is the foundation of your success requires simple decision-making. When you’re beginning your investing journey, consider these points to help you start the right way.
Set Aside An Amount To Save
The easiest piece of advice financial experts give is to understand how much you can save, and then save that much. For some people, this could mean saving 1% of their annual income at a young age. That percentage could grow over time with career changes, raises and other factors. It could also decrease at some point as life changes and circumstances happen. You can look at all of the investment strategies you want, but you’ll feel much more comfortable with the path you choose if you set aside an amount to save each month or year and stick with it.
Diversify Your Portfolio
Diversification is likely a term you’ve heard from financial experts. While it may seem like a fancy and confusing term, it simply means to invest in different areas rather than putting all of your money into one place. By doing so, you’re decreasing the risk of your investments without negatively impacting the expected return. Investing in a single company could be devastating for your investments if the company goes under. But with diversification in your portfolio, it will only be a minor blip in your overall financial picture.
This is where things get a little more complicated if you don’t have a lot of financial knowledge. Asset allocation simply refers to how you spread out your money among your investments. While diversification means spreading out areas to invest, asset allocation focuses on exactly where you invest. Most of the time this simply comes down to how much of your money you want to put toward stocks versus bonds. Stocks are riskier, but also offer the greatest potential return. Bonds don’t offer as many potential returns as stocks, but the risk is also much lower. Your asset allocation largely depends on the amount of risk you’re willing to take.
Focus On Long-Term Goals
Markets will swing up and down and it can be tempting to make drastic changes depending on the circumstances. However, once you’ve set a solid long-term investment plan with your financial expert, stick to it with very few deviations. Of course, you should always look for new valuable investment opportunities if they make sense. The daily news should not be your reason for making dramatic changes in your financial plan, though.
Stock Investing Info knows how challenging it can be for new investors to understand where they need to begin. The earlier you start saving your money, the more options you will have later on. We are here to help, so contact us and one of our experts will be happy to talk with you.