Where Do You Start Investing?
As COVID-19 continues to drastically change the workforce, the world of finance receives more and more attention. It’s no wonder many have been tempted to learn more about investing, but where can you start? We’ve put together some basic concepts any new investor should learn in order to answer that very question. Let’s get started!
Set Your Goals:
It’s important to set specific goals for your money before investing. Whether for retirement, college, or just a safety net, clear goals will guide your investments over time. Long term planning can greatly benefit from checkpoints to ensure you’re staying on track. Keeping watch and staying specific with your investments will help keep your assets separate from your emergency and general funds.
Plan for the Risk:
Determine how comfortable you are with risk, as most investing comes with some level of uncertainty. Start by considering your own feelings about putting your money into something that has potential to lose value and your timeline for when you’d like to use the money. For instance, a low-risk investment may be better for a short term goal whereas investments that fluctuate more frequently may suit a long term goal. Remember, it’s your money: do what makes you feel comfortable. Take your time deciding what best suits your needs.
Before we describe a few investment types and what makes them different, it’s important to remember to diversify. Remember the old adage, “don’t put all your eggs in one basket”? Spreading your money out can help level market fluctuations and provide some protection when certain parts of the market experience loss. With this in mind, here are a few common investment types:
- Bonds – Bonds can be corporate or government bonds purchased individually or within a mutual fund. Though not without risk, bonds are generally more stable than stocks and pay yields.
- Stocks – A stock represents part ownership in a company, and there are many types. They’re usually classified by the company’s size – small, medium, and large – and can be purchased individually or as part of a mutual fund.
- Real estate – Buying property outright is one way to invest, but you can also invest in a Real Estate Investment Trust, which you can purchase through a broker. Some benefits this can provide are dividend based income, liquidity, and inflation protection.
- Mutual funds and managed funds – Many investment firms offer mutual funds: a pooling of many investments that meet specific profiles or goals. Some of these firms group investments together by date-based goals, meaning that you can select investments based on the date by which you want to reach the goal.
Investment opportunities are plentiful and many don’t require you to have a ton of cash to start. You can always start building towards your future goals no matter your current financial situation. While some firms do require large balances to secure their services, others don’t. As a member of PSFCU, you have access to services through our partner, LPL Financial. They offer financial advisory services and provide tools for you to track and manage your investments. With tons of free information available, you can also go it alone with online investment platforms.
For more information on investing, give us a call at 626.351.9651. We’ll be happy to talk to you about your financial goals and help make a plan for reaching them.