You have made up your mind – it’s time to start investing. Maybe you’ve asked around and heard all of the positive experiences that your friends and family have had with investing their money. You might have some big future goals and think that investing could be a good way to grow your personal wealth. But, after you make the initial decision to invest, where do you even start? This is a question that all investors are faced with, and it is something that requires a little bit of road-mapping to answer. To help you make your map, we have assembled a list of some of the most important steps that investors take in order to turn their investing dreams into a reality.
1. Make a Budget
It is impossible to invest without setting aside at least a little bit of capital to start. To make sure you’ll be able to save enough money, you might consider creating a budget with all of your expenses for the upcoming months. Consider all of the big expenses you expect to incur – including all costs of living, traveling, entertainment, and a little bit of cash for emergencies. Then, look at your remaining sum. How much can you comfortably allocate to starting an investment portfolio? Remember: it’s not about the amount you start with, it’s about the fact that you’ve made the decision to start!
2. Read up!
There is no need to be an expert in finance in order to start an investment portfolio, but that does not mean you can’t still do your research! Take a few weeks or months to learn the basic terminology surrounding investing and read as much as you can about different investing strategies and platforms. The more you read, the more you’ll be able to make informed decisions!
3. Set Your Goals
Once you have done a sufficient amount of research, set some realistic goals. Think about how much money you have allocated to begin your portfolio, how much money you will add periodically, and how much money you would like to have by a certain date. Are you thinking in the long term or the short term? Do you want to have a specific amount of money in only a few years, or are you investing simply to let your money grow over time? You may want to write your goals out on a piece of paper so that you can always think back to your initial targets when making new investment decisions.
4. Analyze Your Risk Tolerance
Now, think about your specific goals and assess how much risk you can take. If you have a hard deadline for when you want to have a set amount of money, you may think about taking less risk than you would if you had a long-term plan. If you get nervous at the thought of taking risks, you may consider taking less risk than a person who is truly excited by the prospect of risk. Maybe your risk preferences lay somewhere in between. Whatever your risk profile, keep these thoughts in mind because they will help you choose investments that are right for you.
5. Think About the Costs
It is important to remember that investing typically comes along with minor costs. You might want to do a little bit of research to see what kind of cost structure is right for you. If you plan on making many investments, you might consider a subscription-based model so that you don’t have to pay commission on each individual investment. But, if you plan on having a more passive strategy, you may choose to pay per transaction!
6. Pick Your Stocks
The time has finally come! It is time to organize a list of the investments that will become parts of your portfolio. Use your risk profile to determine what kinds of investments – conservative, risky, active, or passive – that best suit you! Remember to diversify your investments between various industries and companies, so that you can best minimize your total risk.
7. Adjust as You Need
Of course, picking your stocks should never be the last step in your investing process. After you have picked your stocks and invested all of your allocated money, you should make yourself a schedule, so that you can check back in on your investments periodically – depending on your investment style, of course. Each time you check on your portfolio, you can adjust it as needed. It is important to keep in mind that your portfolio will experience volatility over time and that you may not need to change your whole strategy each time your portfolio experiences this volatility. With time, it will become easier for you to determine when to make changes and when to let your portfolio ride the normal waves of volatility!
We hope that this has shown you how simple investing can be – even if it sounds daunting at first. With a little bit of a roadmap, your investing future can become a lot clearer!