Investments for Beginners: What to Expect the First Year
6/27/2012, 1:29 p.m.
Whether you are in twenties and wondering how best to make your money work for you or in your forties and desirous of ensuring your retirement is safe, it's never too late to begin investing. Before you jump into the stock market with a "sure thing" tip from your neighbor, however, be sure to do your research and understand what you can realistically expect from your first year of investing.
Finding Support for Your Financial Plans
Consulting a financial planner and creating a financial plan is crucial to investment success. A qualified financial planner will help you determine whether or not you are in a position to invest.
If you are not yet in a position to invest, a planner can help you create a plan to pay down any debt you may have and eventually save money to invest at a later date. Once you have saved the money to invest, a financial planner can help you evaluate investment opportunities and create an investment plan turned for
Learning the Ropes
Risk: "Without risk, there is no reward." All investments carry some risk, but a greater risk does not always mean a greater reward. While no one ever wants to lose money, you'll never invest money that you cannot afford to lose. You will learn right away how an investment might go down (or up) only to reverse in the other direction a few months later.
Finding Your Niche: In your first year of investing, it is important to remember that you are still learning how to invest. While it may be exciting to find up-and-coming investment opportunities, it may be wise to stick with companies that are proven performers instead. You'll soon discover where you are the most comfortable placing your money and why.
Importance of Diversification: When planning your investments, you will always be told to diversify. Putting all of your money in any one industry or product can spell disaster for your portfolio if that industry were to take a loss. Diversifying your portfolio will help strengthen your portfolio against ups and downs in the market. And while diversifying also includes putting some money in long-term investments and others in short-term, you should learn to be wary and to do your research before investing. Investment opportunities that promise high rewards in a short time are often investment fads and are more likely to lose money rather than make money.
A Lifetime of Learning
Once you start investing, it is up to you to continue to learn more about the market. Learn about other investment opportunities, evaluate them, and figure out whether they are right for you. Monitor your investments with your financial planner to ensure that your investments are continuing to help you meet the goals that you set for yourself. While a financial planner is your partner in the process, it is ultimately up to you to make the final decisions.
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