Although there is great interest in investing in stocks, bonds, and other funds, many individuals are hesitant to do so due to the fear of market instability or even downturn. However, with the stock market on the rise, now is as good a time as ever to dive into the realm of investing.
Here is some advice all first-time investors should adhere to:
Do your research
One of the best ways to overcome the common fear of investing is doing ample research. The financial realm is filled with jargon and acronyms that can be extremely confusing to first-time investors. So, it would be wise to improve your financial literacy by researching the basics of stocks, bonds, mutual funds, and even commodities like gold and silver. Try reading the works of seasoned financial experts as well, as these publications will likely offer a great deal of insight.
Save before you invest
Although there are plenty of inexpensive stocks on the market, it is imperative to establish a sizable emergency fund just in case something goes awry. Many experts suggest that first-time investors save at least 6 to 12 months’ living expenses before even looking at stocks. Following this advice ensures you will have enough money to safely avoid a financial crisis and time to get yourself back on your feet.
Determine what you are investing in
Once you have become familiar with the market, as well as saved the recommended amount of money, you can begin searching for the right assets for your budget. One option to consider is an exchange-traded fund (ETF) like SPY. This particular investment seeks to provide results that correspond to the price and yield performance of the S&P 500 Index. Although this means you will be investing in small stocks from 500 separate companies, this method is one of the most secure, seeing as it is highly unlikely that all 500 companies would bottom out at the same time.
Establish your long-term goals
It is important to remember that investing is not a surefire scheme one can employ to get rich overnight. Investing requires not only research, but time and patience as well. Therefore, it is important to set realistic goals and refrain from expecting a large return within even your first five years. By establishing this mindset early on, you will be less likely to venture from your original plan or pull out of the market all together.
Control your emotions
It is easy to be perturbed by the constant fluctuation of the stock market. However, it is important that you remain consistent during both booms and busts. Do not let your emotions rule your investing decisions — otherwise, you may end up losing the portfolio you worked so hard to establish.