How to Invest for a Beginner

The time has come for grown-up action.

The time has come for grown-up action.

It's time to start your investment portfolio. You wracked your brain to remember what your college finance professor tried to teach the class. You picked your friends' brains trying to figure out if they are doing it right and what they recommend. You even called dear old dad to seek advice, but in the end, you are the one who will have to make the decisions when it comes to your investments. Understanding some of the basics of investing can help you relax and take those first steps into the world of finance.

Define your investment goals.There are many avenues that can be taken when it comes to investment. Before getting started, you should decide if you are aiming for long-term, slow but safe growth, or if you want to take some risks that have larger pay-out potential. Writing up a a clear-cut financial plan for the next five years will help you define the investment direction you will take.

Choose an investment amount. To safeguard your assets, monthly income and sanity, it is important to set an amount that you are willing to spend on setting up your initial investment portfolio. This can be as simple as deciding you will invest 10 percent of your income or investing every check Aunt Myrtle sends you for your birthdays. You may want to invest a lump sum to jump start your investment portfolio. Whatever amount you decide to use for your beginning investments, stick to it and avoid going in over your head.

Choose a risk threshold. Investments can be tricky. The time to decide where your limits are is not as you watch the stocks go into a temporary nosedive. Investment portfolios are built to withstand the long haul; therefore, before you get started, you should decide at what point in each investment area you will cut your losses and sell or stop investing, at least temporarily.

Interview several investment brokers. If you decide to let a broker handle your investment portfolio, you need to ask questions. Finding out after you have lost everything that your stock broker has been fighting indictments for years is not the best way to begin your investment experience. Asking on the front end if the broker has ever been in arbitration, under investigation or fired from a firm can protect you and your hard earned money. Don't be afraid to ask hard questions, ask for references and call the references for their recommendations. Be aware that some brokers provide more information and advice than others, and their fees may vary accordingly. Decide what level of service you'll need.

Avoid surprises. Whether you choose to manage your own investments or turn them over to a trusted professional, you need to maintain a watchful eye on their growth and future. This is your money and your future. Maintaining a watchful eye on what is happening with your portfolio will help you make decisions about future growth.

Warning

  • Choose your investment firm carefully. According to the U.S. Securities and Exchange Commission, if your broker or investment firm goes out of business, you may never recover your money, even with a court order. Therefore, the SEC recommends researching and choosing who to trust with your money very carefully.

About the Author

Candace Webb has been writing professionally since 1989. She has worked as a full-time journalist as well as contributed to metropolitan newspapers including the "Tennessean." She has also worked on staff as an associate editor at the "Nashville Parent" magazine. Webb holds a Bachelor of Arts in journalism with a minor in business from San Jose State University.

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