Smart Tips for Beginning Investors

by | Jun 25, 2012 | Personal Finance

Stock Market InvestingSo you have reached the point where you have some money in savings that you want to keep for the long term future.

However, you realize that putting it in your run of the mill savings account will likely result in its compound interest rates barely keeping up with inflation.

You are willing to accept a little bit more risk in return for a higher reward and you are interested in investing in the stock market.

Investing can be intimidating for the beginner and there is a lot to learn about the world of stocks and bonds.

Here are a few things to remember when you are first starting out:

Educate Yourself

Investing in the stock market is very complex and there is a lot to learn about the different techniques, terminology and types of investments.

Before you start sinking in your cold hard cash, you will want to do as much research as possible so that you can make informed decisions.

Speak to those who have experience investing, read about investing online and in books or even sign up for an introductory course.

Do a Trial Run First

If you want to practice investing in the stock market to get the hang of it before you commit your money, you can use fake dollars in an online stock market simulator.

This is a great way to practice trading and get an idea of how stocks and bonds work before you choose your real investments.

Put Your Eggs in Many Baskets

Diversification is a key to a successful portfolio, which means that you should never invest all of your money into one stock.

If all of your eggs are in one basket, that particular stock could perform poorly and you could be out of luck.

However, if your assets are divided amongst many different types of investments if one fails then the successes of the others will balance it out.

Don’t Forget Your Emergency Fund

Remember that you should never consider investing until you have adequate savings in your emergency fund.

You should have at least 3-6 months of savings in an easily accessible savings account in the event that you get injured or ill, lose your job, or some other unexpected expense comes along.

If all of your savings are tied up in the stock market, you will have no safety net to help you in this situation.

These are a few things to remember when investing for the first time. Good luck and have fun!