Investing for Beginners
Last week I gave some vocabulary lessons on investing. Click HERE for a refresher:
This week, I am sharing tips on how you can start to make your money work for you. Here are five steps you to take to get in on the stock market action:
1. Understand your goals: What are you looking for from your investment? Are you looking for a stream of income, steady growth, or both? Think about long- or short-term goals. Long-term investments are typically your best bet. You have to leave your investments in the markets for a long time to get the most bang for your buck. Put money in the market that you won’t need to touch for the next five to 10 years.
2. Determine how comfortable you are with taking risks: Stocks go up and down–without notice. If you buy a stock one day and the next day it receives negative press and it’s down 20 percent, what will be your reaction? That is just like investing $1,000 and the next day having it worth only $800. Would you then sell right away and take off running? If you’re too skittish, this may not be your game.
3. Know what you are getting yourself into: All stocks are liable to rapid and unpredictable change, especially for the worse, but they also represent one of the best investing sectors. Over the past 80 years, the larger stocks have returned on average 12 percent to investors. Some years, the stocks went down drastically, but overall the long-time investors have enjoyed phenomenal performances. Ultimately, buying stocks is always risky. Know what you’re signing up for before you make a move.
4. Be diverse: Ready to purchase your first stock? Consider a diversified Exchange Traded Fund or (ETF). The ETF tracks the Dow Jones Industrial Average. So when the Dow is up or down, ETF will be tracking the moves and keeping you informed so that you will know what is going on with your investment.
5. Get fixed: If you simply want another stream of money filtering into your home, then you should consider buying a fixed income investment. The best first-time investment that can be bought is a money market fund. Simply open a brokerage account and deposit the minimum required by the broker, typically between $1-$2,500. Regardless of the dollar amount you invest, you will automatically have the money put into a money market fund at your brokerage firm. This is a great way to gain interest on your money over time while you become more comfortable with investing.
About Dr. Karen Ratliff
Credit: Dr. Karen Ratliff
Dr. Ratliff is a certified life coach and professional educator, assisting many people in accomplishing financial, career, and educational goals. She is also the author of “Tightening Your Bootstraps: 104 Tips to Kick Your Debt to the Curb Now.” Keep up with her budgetary advice via Twitter @drkarenratliff her website atwww.drkarenratliff.com, and her facebook fanpage “Financially Focused with Dr. Karen Ratliff.”