6 Tips On How To Invest
There’s a lot to learn when it comes to investing. Here are my 6 top tips on how to get started with investing.
Find a platform that is easy to use and has low fees. The two brokerage firms I use are Robin Hood and E-Trade. Robin Hood is great because they do not charge any trading commissions (you usually have to pay a commission when you buy and when you sell a stock). It also gives you quick news headlines and links to articles regarding the stocks on your watchlist (your watchlist is a list of stocks that you want to monitor, not stocks you’re invested in). I also use E-Trade because it’s a more robust platform and gives more information when researching stocks.
Start following the financial news, companies, and sectors that you want to invest in prior to investing your money. It’s important to get comfortable with the swings in the price and how the stock market reactions to news.
Understand what your risk tolerance is before you invest. There are some companies that will be more risky, which means the price can fluctuate more frequently. Not everyone can stomach that much volatility. Whereas other companies’ stock price might not move as frequently. So before you decide what companies or industries you want to invest in, decide if you can stomach big swings in stock prices or if you’d prefer to see your money hold steady. Keep in mind though, when you buy a stock, nothing is guaranteed. We saw first hand during the financial crisis that some of the largest companies were capable of going bankrupt. So that’s why it’s also important to follow the financial news so you are aware of how your investment is performing.
Don’t put all your money in one stock but also don’t go over board and buy so many stocks. You’ve probably heard of the word diversification. It’s finding the right balance of how many and what companies/industries/sectors to invest in. I recommend owning somewhere between 8 - 12 stocks or ETFs that represent different industries or follow certain trends. And you don’t need to buy all of these at one time, you can continue to build up your portfolio.
Invest in companies or industries that you understand and never just invest in something because a friend told you about it. ETFs are a great way to get started because it gives you exposure to an industry or sector. It works like a mutual fund in that it is a baskets of individual stocks but it trades on stock market (so provides you more liquidity), fees tend to be lower, and it can be tax efficient.
Commit to monitoring to your portfolio at least twice a week. This will help you stay informed and be able to make decisions on whether you are ready to buy or sell a stock.
There is always a risk when investing so make sure to do your research and be fully informed and educated before making any investment decisions. Send me an email with any additional questions you have!