Start Investing Today-5 Easy Ways To Start Your Investment Portfolio

Creating, expanding, and managing a portfolio can intimidate first-time investors. Beginners often ask hard questions like, “What should I learn before I start investing?” and, “how much money should a beginner invest for the first time?”

Putting in the work to answer these questions and overcome the challenges associated with investing, though, is well worth it. With a good portfolio, your money can grow over time to provide you with valuable income, retirement funding, or valuable assets. If you are ready to start investing, you have come to the right place. Here are five tips that will help you start investing today.

Tip #1: Be Informed About Your Options to Start Investing

Before you start investing any money, it is your responsibility to understand the basic kinds of investments that are available to you. We list simple explanations of the most popular options below, but be sure to do your own research to learn more.

  • Stocks and Bonds
    Stocks allow you to purchase shares of public companies. As the value of a company fluctuates, so does the value of your stock. You can start investing by purchasing a single share or multiple shares, and then selling your shares when the value increases. Bonds are like loans that you can give to the government. In exchange for your money up-front, the government pays you a rate of interest for the loan.
  • Mutual Funds
    Mutual funds, a popular option for new investors, are groups of stocks that are bundled together. You can start investing in these just like you would in a single stock. Many funds are actively managed by professionals who aim to keep the portfolio more profitable on your behalf.
  • Real Estate
    Many investors make money by purchasing and renting property. Landlords get good investment returns this way by charging monthly fees for rent and utilities.
  • Bank Accounts with Interest
    There are several ways to grow your money simply by leaving it in a bank account. Some high yield savings accounts will pay you interest on the money that you park in an account. These accounts often place limits on the number of transactions you can make in a month, so be careful. Certificates of Deposit (or CDs) are similar, but they often come with higher interest rates. When you open a CD with a bank and deposit your money, you agree not to remove your cash for a set amount of time. While sitting in the account, your money earns interest each month.
  • Gold and Silver
    Precious metals provide physical, tangible value for investment portfolios. Because there is a limited supply of gold and silver, many investors find them to be worthy of purchase.
  • Cryptocurrency
    Cryptocurrencies are relatively new to the world of investment. These digital assets are based on the value of their web-based transaction. Like stocks, owners buy and sell the currencies as their value rises and falls. Currencies such as Bitcoin, Ethereum, and Litecoin are some of the most popular choices as of 2021.

Tip #2: Evaluate Your Financial Situation and Set Goals

Now that you know more about common investments, it is time to make a plan for how you will put your money to work. Know that it is best to start investing as soon as possible. Doing this allows you to increase potential earnings, so do not delay in this phase.

The first question to ask yourself is what your investment goals are. Do you want to start investing for retirement, or a new child’s college education? Are you hoping to supplement or totally replace your income? Is your aim to collect tangible assets that you can pass on to your family? No matter what your goals may be, there is an investment strategy to suit your needs.

Retirement Savings

Once you have a clear vision of your goals, open the investment accounts you need to get started. If your goal is to save for retirement, you may already have a 401(k) fund set up through your employer. You can also open a Roth IRA account to invest through.

If you want to make interest on your cash, research options are available through local and online banks. If your goal is to invest in single stocks or cryptocurrencies, it has never been easier to start doing that online.

Evaluate Your Goals

Now that you have evaluated your goals and opened the accounts, it is time to decide how much money to start investing with. Many people set aside a set percentage each month to invest with. Between 10 and 15% are popular starting points.

Of course, depending on your needs, you may decide to allocate more resources or fewer resources. Consistency is often key. All too many investors do not reach their potential earnings because they cannot follow through with their commitments.

Tip #3: Understand the Risks and Plan Accordingly

If you are hoping to get rich quickly by investing, think again. All investments carry a certain amount of risk that has the potential to hurt you. The higher the risk of the investment, the greater return you might gain.

The flip side of this coin is that you also stand to lose more money if a high-risk investment fails. Lower risk options usually present lower potential earnings, but also a diminished risk that you could lose your money.

Understanding Risk

Before you start investing, consider how much risk you will take on in your portfolio. Do you prefer to be aggressive or conservative? By understanding the risks associated with each type of investment, you can save yourself a great deal of stress.

Common investments with lower risk are CDs, high yield savings accounts, precious metals, and bonds. Higher risk sources are rental housing, cryptocurrency, and certain stocks. Of course, when investing in stocks and mutual funds, the risk may vary based on the company (or companies) you invest in.

Find Investment Data Online

Know that the value of your investments will fluctuate. Before allocating your money somewhere, consider watching the prices of that asset change. You can find live and historical data online. Notice that higher risk sources fluctuate more often and more dramatically.

Low-risk sources carry less volatility. This is an important fact to understand. Just because you see the price of an investment rise and fall does not mean that you should pull your money out immediately.

Tip #4: Start Investing!

After you have put in the work to understand investment types, made an investment plan, and gained a solid grasp on risk, it is time to start investing. Here are a few tips you can use to set your expectations along the way:

  • First, understand how you are going to move your cash into investment sources. If you have an online investing account, you will contribute money by transferring money to this location from your bank account. This process can take several days. If you have a CD or high yield savings account, you may deposit cold hard cash or wire the money electronically. If you are investing in physical assets, many people choose to do business in person. This could mean buying gold at a shop or purchasing a rental property in your neighborhood with the help of a real estate agent.
  • Second, be careful not to over-invest at first. Many first-time investors enthusiastically dump massive amounts of their money into their new assets after they start investing. This can be very dangerous. Even though you are starting an exciting journey, take the time to move carefully and consistently as you start investing.
  • Finally, remember to never invest in anything that you do not understand. If you need help, seek a professional that can answer your questions.

Tip #5: Diversify Your Investments

Now that you are well on your way to becoming a pro at investing, you can diversify your investments. To diversify your portfolio means to vary the kinds of things you invest in. In mutual funds, for example, this could mean that you spread your money across different varieties, such as international and aggressive funds.

It is wise to diversify the kinds of investments that you have across broader categories as well. Practically, this might look like a real estate investor purchasing stocks or precious metals. Or, it could look like a CD account holder purchasing cryptocurrencies online. Varying the kinds of investments you hold is beneficial.

By having a varied portfolio, you lower the collective risk of all your investments. When the value of some investments is going down, your other assets ensure you stay out of financial trouble. If you have a very conservative portfolio, consider taking on more aggressive sources to increase your earning potential.

If you already have an aggressive set of investments, perhaps start contributing to safe, conservative sources as well.

Taking the Fear Out of Investing

Thinking of investing your hard earned money can be challenging. But as  long as you have set goals and educated yourself on the various ways to invest, and how much you can afford to invest, your fears will fade. Remember, start small while looking at the big picture.