Investing Guide

investing guide

Investing is the process of putting your money into an asset that can grow in value and earn you a profit over time. It’s a great way to build wealth, especially if you want to start your own business or retire comfortably.

But before you start investing, it’s important to know your limits and understand how risky different types of investments are. This will help you make wise decisions and ensure that your portfolio is as diversified as possible.

There are many ways to invest, but all have their benefits and drawbacks. For example, passive investing focuses on investments that can be easily tracked, like index funds, while active investing aims to find companies with high returns and low fees.

Understanding the market:

Unlike your regular bank account, which is where you save money for a rainy day, investing involves buying and selling shares of stocks and bonds in exchange for cash. It’s important to open an investment account before you buy any of these assets, and big-name firms will allow you to do this as easily as if you had a checking account.

Determining your goals:

Before you invest, you should consider your financial goals and how much time you have to spend on the activity. Knowing what you hope to achieve will narrow down the types of investments you need to choose, says Lauren Niestradt, CFP, CFA, and portfolio manager at Truepoint Wealth Counsel.

Stocks:

The most common form of investing, stocks are small pieces of ownership in publicly traded companies. They usually represent a portion of the company’s capital and increase in value if the company performs well.

Bonds:

Another popular type of investment, bonds are debts issued by publicly traded companies to raise money for growth or expansion. They are generally safer than stocks, but their rates of return can be lower.

Dollar cost averaging:

If you don’t have a lot of cash available to put into the market, dollar cost averaging can be an effective way to invest your money over time. This strategy involves putting your money into an investment fund on a regular basis, such as every month or quarterly.

Establishing an emergency fund:

It’s also essential to have an emergency savings account in place before you start investing. This will give you a cushion in case of emergencies, so you don’t have to sell anything you already own.

Steering future savings in the right direction:

Ideally, your savings should be in low-risk investments that can easily be accessed if you need it. This might mean a high-yield savings account or a low-risk, low-fee bond fund.

You can also invest in a robo-advisor, which uses an algorithm to automatically select and manage a portfolio of exchange-traded funds that are based on your personal investment goals and preferences. This is a great option for beginning investors, because it takes the guesswork out of figuring out which investments are best for you.