7 Investment Tips for Beginners: A Complete Guide

Investing your money is one of the best ways to increase your income and grow your wealth in the long-run, but the thought of investing your hard-earned money can be overwhelming. If you feel this way, you’re not alone. In fact, more than 47 percent of Americans aren’t investing their money in any way.

The most common reason people aren’t investing their money is that they feel confused or just aren’t sure how to get started investing in the first place. Do you try to follow the market and make predictions or are you better off putting your money in a savings account?

While the answers may differ from person to person, there are a few investment tips for beginners that can help you make the most of your investments. Here’s what you need to do to be as successful as possible.

1. Invest in Yourself First

Before you can start buying stocks, bonds, and other investments, you need to invest in yourself. If your employer offers a retirement account, enroll in it, and start making the maximum annual contribution immediately. If they don’t, look for a retirement account that you can set up on your own.

It’s also a good idea to build your emergency savings fund if you haven’t already. These funds can help you cover unexpected expenses that pop up throughout the year so you don’t have to rely on credit cards or loans.

If you start investing before you start saving your money, you won’t be able to grow your income safely or effectively.

2. Pay Down Existing Debts

The biggest strain on peoples’ ability to save money in the first place is outstanding debt. Look at your credit card statements, personal loans, and any other debts you currently have.

Make a plan to pay those debts down as soon as possible. Remember, the more debt you carry, the more interest you’ll owe each month. If you’re not careful, that interest can add up and you’ll end up owing your lenders more money than you spent.

Get as much of your debt paid off as you can before you make your first investment. This way, your total income will grow and you’ll be able to use your earnings to further bolster your savings rather than paying what you earn to a third party.

3. Start Investing A.S.A.P.

Once you’ve started saving money and paid down your debts, you’re ready to start investing. Unfortunately, many people end up coming up with excuses or reasons for why they can’t start investing.

These can range from lack of knowledge to feeling that they don’t have enough money to start in the first place.

Instead of putting things off, get started as soon as you can. You don’t need to know everything to start figuring out how to begin investing your money. You just need to be willing to try.

You don’t even need to have tons of money saved up to get started. Many investment advisors and programs let you contribute small amounts of money at a time. They’ll use that money to invest in funds that will give you an appropriate percentage of return.

As you build your savings and increase your income, you can invest more money in the things you’re passionate about.

4. Invest in Different Things

Once you start investing and see returns, it’s tempting to make the same types of investments across the board. However, it’s not in your best interest.

Instead, you’ll want to diversify your portfolio. Invest in different stocks, bonds, and mutual funds. Keep an eye on the gold spot price and invest money in safe options.

The more types of investments you have, the safer your money will be. If one company struggles or the market crashes and hurts one part of your portfolio, the rest of your portfolio will be less impacted.

In the long-run, you’ll end up saving money and can better hedge against potential loss.

5. Follow Your Passions, Not the Trends

One of the biggest mistakes beginners make when figuring out how to invest money is relying on the market’s trends to make decisions. This seems smart on the surface. After all, if you’re able to follow the trends and get in on investments before they take off, you’ll make more money, right?

It’s not as simple as that. The market’s trends are almost impossible to predict with any accuracy. If you try to follow the trends, you’ll likely end up making costly mistakes.

The best thing you can do is follow your passions rather than trying to predict how the market will perform. For example, if you’re passionate about technology, look for up and coming tech companies to invest in.

You’ll be supporting businesses you believe in while also increasing your income.

6. Keep Your Emotions Out of Things

Market conditions change. This is part of the process and it’s normal for your portfolio to lose money every once in a while.

Rather than responding to those losses emotionally and selling the investments that aren’t performing as well as you’d like, take a deep breath. In most cases, the investments will rebound and you’ll be able to recoup your money.

However, if you sell them as soon as you notice their values dropping, you’ll risk getting far less for your investments than you paid.

7. Figure Out How Much Risk to Take

Understanding risk tolerance is one of the hardest parts of investing for beginners. Every investment has a certain amount of risk associated with it.

Higher risk investments have the potential to earn more money but are more likely to drop in value. Low-risk investments earn money less quickly but tend to provide consistent earnings throughout the year.

Look at the risk you’re willing to take with your funds and purchase investments accordingly.

Use These Investment Tips for Beginners Now

Investing is a great way to increase your income without having to take on the burden of a second job. However, figuring out how to get started in the first place isn’t as easy as you’d think.

Keep these investment tips for beginners in mind and you’ll be on the right track from the very beginning.

Looking for more insight into how to boost your income and grow your wealth? Check out our latest posts for more helpful tips and tricks.