Investment Advice for Beginner Investors
Beginners have heard people give their own piece of investment advice. From tips like “You’d have to be an idiot not to put money in tech stocks right now” or “Invest in oil and you’ll be set for life.”
However, many people do not understand that investment advice shouldn’t be given — or taken lightly.
When it comes to giving investment advice, there is no one size fit all. If there was, we’d all be Warren Buffett rich by now.
However, there is some investment advice that is universal and applies to everyone. Below is this universal investment advice.
- The sooner you start, the better
As beginner , to you need to understand, investment allows your money to grow instead of sitting idle. When you invest, any returns you earn are added to your balance. Your future returns are then based on that bigger balance. For example, if you invested $10,000 and earned a 6% average annual return on your investment, you’d have over $18,000 after 10 years. If you leave the money 30 years to grow instead, you’d have over $60,000.
The earlier you start investing, the more time your money has to accumulate wealth.
- Create a financial plan
Hearing the different terms associated with investments can feel very overwhelming. You can start by drawing up a financial plan to create a sort of roadmap for your financial future. By outlining your financial goals, timeline, and your risk tolerance, you make it easier to answer some of those tricky investment questions.
Your financial plan should also include on your willingness to manage your investments yourself or if you want help. Financial planning can be expensive, but options like robo-advisors and online financial planning services have driven costs down. Some robo-advisors offer investment management for as little as 0.25% of your account balance.
- Don’t try to predict the market
Do not start your investment journey by trying to predict the market. Even a professional finds it challenging to predict the market. With your elementary understanding predicting the is extremely risky. This piece of investment advice is extremely important.
Instead of investing in a single stock or industry, a total-market index fund will give you exposure to multiple stocks. Also, it will help diversify your portfolio and lowers your risk. Since index funds are managed passively, fees tend to be lower than actively managed funds.
Other investment Advice for beginners
It is important to think about your investments as a marathon instead of a sprint. This can help reduce your urge to sell if the market takes a turn for the worse. When you do this, massive dips in the market don’t feel as scary if you plan to stay invested long-term. This is because you have time to recover.
As a general rule, money you need in less than five years shouldn’t be invested in the stock market. For short-term goals, you should consider putting it in an online high-yield savings account instead.