In my humble opinion, I think that all of us should invest our savings.
In fact, the sooner we start investing, the better our results will be. Often the problem is that investment language sounds like Chinese and there are more products that you can find in a Dollar Store. The key point to remember when you are a beginner investor is to start with a simple investment method. Then, along the path to becoming a knowledgeable investor, you will be able to implement more complex investment theories.
Before starting to invest, the very first step is to know your asset classes and determine how you want to invest your money at the beginning. You can put most of your investment in the same account or work with investment buckets as suggested by Anthony Robbins. So how do you start investing? Here are a few guidelines:
Set up the investing habit
All right, you are all pumped up and you want to make money. At the same time, you are a bit scared of the markets (remember, the great depression is about to come… tsss) and you don’t know how to start your investment strategy.
The very first thing you need to do is to open an investment account. At first, I’d suggest you do it with a good financial advisor. Usually, bankers or independent advisors have decent investment products for the masses and they will be able to help you set up your account. For more advanced investors, opening a brokerage account will be the best thing to do but I’ll talk about that later on. Don’t forget to shop around and I would also suggest not investing in funds with high MER’s (management fees) or load fees (penalties when cashing your money prematurely).
Once your investment account is opened, you need to determine a monthly or bi-weekly investment amount. The easiest way to succeed as a beginner is investor is through systematic investments. Start with a small amount and increase it over time. If you consider your investment as another payment, you will make it on time and will simply get used to living with less disposable cash in your pocket.
One last note for investment beginners; if you start with systematic investments, you can start as low as $25 a month or lower!
Select an investment strategy for beginners
My favorite investment solution for investment beginners is packaged mutual funds. They offer a variety of levels of risk (from very safe to extremely volatile) and they are low in transaction costs. While it is far from being the most sophisticated investment solution, I think it is perfect for someone who wants to get familiar with the world of investing.
This is why I am suggesting to go with a banker or a financial advisor. He will complete an investor profile and will make sure to invest your money according to your goals, the time horizon the money will be invested for and your risk tolerance. He will then offer you a mutual fund where your money will be invested among the stock markets, fixed income as well as other asset classes.
This kind of mutual fund is managed by a team of portfolio managers and they rebalance your portfolio to make sure you always have a consistent proportion of each asset class in your investment account.
So, just to keep things simple, I’ve gathered the Investment Beginners Baby Steps:
Remember, investing is a long path to financial freedom. It’s not a highway!
What do you think of Mike’s investment strategy for beginners?
This post has been written by Mike from Green Panda Treehouse. He is a financial planner and runs several finance blogs within his online company. If you like this post, make sure to stop by Green Panda Treehouse and subscribe to his RSS feed.