When you didn’t know where to begin with investing your money, it can seem daunting. When looking at all the overly detailed articles telling you that you need to think about ten different things at once, you might feel like just giving up on the idea. However, it is possible to start investing with little knowledge and still succeed. There are 4 main things that you should know about investing your money to set yourself up for success.
1. You Don’t Need A Fortune To Start
A lot of people think about Wall Street when someone mentions investing in a conversation. While there is a good reason for that – it’s the center of the financial world – it certainly doesn’t mean you need to have a fortune to get started. In reality, using your finances in a smart way means that you can start investing in small but impactful ways that will provide you with passive income. Of course, passive income doesn’t mean you don’t have to do anything at all. It just means your money is working for you so you don’t have to work all the time. Pick one or two things you’re interested in, that seem promising and that are within your budget, and see how it goes. The best place to start with probably be an investment that doesn’t carry a lot of risks. When you’re just beginning, especially if your starting capital isn’t all that much, you’ll probably want to focus on things that will grow in value over time, instead of chasing after those investments that could potentially turn a fast profit for you, but that could also easily be a loss. Once the returns start creating a fluffy safe zone for you – by which time you’ll have a bit more know-how about the market trends, you can start taking a more active role and make bigger faster investments.
2. Good Financial Habits
While you really don’t need a big starting capital, you do need to have some money saved on the side in order to start investing. The good news is there are some pretty simple things you can implement into your everyday life that can help you with that. For starters, you might want to look into ways that will help you spend less while grocery shopping – and that can be done pretty easily. Making weekly meal plans that include different meals made out of similar ingredients is a good way to ensure you don’t overspend on unnecessary items. In addition, you might want to cut back on snacks and drinks that you buy on the go. If you stop buying coffee or bottled drinks on your way to work it will easily save you more than $100 each month. Apart from that, setting aside a small portion of your income each month – even just 10 or 20 bucks – to a savings account will go a long way in the future. Those kinds of habits might not put a huge dent into your budget, and won’t induce a drastic change in your lifestyle, but they can be an easy way to create a solid investment fond for yourself.
3. Invest What You Can Lose
You’ve probably heard this before, but this is perhaps one of the most important things to know about investing. The golden rule is – never invest more than you’re willing to lose – even if you think what you’re looking to invest in is a sure thing. This means that you need to take a good look at your finances and decide what you can live without. Of course, if the investment is right and you turn a profit that’s great. However, in case it’s a swing and a miss – and that’s something that happens to the best of us, it’s important that you can just walk away from it without giving it much thought. You really need to keep this in mind because the market can be volatile and it moves very quickly. Something that’s skyrocketing today can be nose-diving tomorrow, and you need to ensure that if your investment takes a plunge it won’t be something that will damage your financial well-being.
4. Diversification Is Key
Once you know what kind of fields you want to invest in and how much money you can spend on it, you should turn your attention towards diversifying your portfolio. The best way to do that is by investing in the market as a whole. This means investing in index funds – which are basically special companies whose goal is to mirror the market, instead of trying to outperform it – or ETFs (exchange-traded funds). These are basically units that you can buy on the stock market and they usually tend to move more in line with how the entire market is moving than individual stocks. So for example, if the price of Apple rises but Microsoft falls, an ETF might reflect that, but if you’ve invested in individual companies it might not happen that way. That said, don’t put all of your apples in the same basket. Find several different things you like and divide your money accordingly. This will ensure that even in a down market you can survive and continue to grow your investments.
In short, if you don’t know exactly what you’re doing when it comes to investing, that doesn’t mean that it’s time to give up and assume the whole thing is too complicated. With these 4 simple things in mind, you should be able to take your first steps into this new world without too much trouble.