Investing can sometimes seem like a daunting task.
The truth is that there are many different ways to invest your money, and you don't need a lot of knowledge or experience to start.
This blog post will discuss 36 investing tips for beginners looking to start their investment portfolio. Even if you only have $100.
1. Keep Your Portfolio Simple
One of the biggest mistakes that new investors make is getting too creative with their portfolios. Instead, it's best to keep your investments simple to maintain a good amount of control over them.
Keeping things under 30 individual positions is ideal so you can avoid being spread out too thin across many companies or funds. For many, index funds may be the way to go for simplicity’s sake.
Recommended reading: How to Invest $100: 40 New Ways You Don't Want to Miss
2. Don't Invest Too Much Money at Once
Unless you are an experienced investor already, it's probably not a great idea to start investing significant chunks of money all at once.
It takes some time for most people to understand how specific changes in the market will affect what kind of returns they want. There may be more room for error by making any sudden moves initially.
Break up your investments over the course of a few months and years to minimize any risks.
3. Rebalance Your Portfolio Regularly
Rebalance your portfolio once or twice per year.
Rebalancing will help ensure that you are not over-focused in any area.
Keep reading: Pros and Cons of Investing in Stocks
4. Look Out for Investing Fees
When selecting an investment, always be sure to look out for the fees associated with it. These can range from management fees to account maintenance fees and more.
By knowing what these costs will be in advance, you can avoid any surprises down the line.
5. Remember That Investing Should Be Boring
When you're constantly checking your stocks or investments and making changes based on market fluctuations, you are more likely to make irrational decisions.
Don’t sweat short-term losses. Everyone loses money if you look at the short term. Keep your eyes set on the long-term.
6. Start With Index Funds and ETFs
When starting, it's best to keep things simple by investing in index funds and ETFs.
Index funds allow you to follow specific sectors of the market as a whole. When you start investing, shy away from selecting individual stocks.
7. Start at a Young Age
One of the most significant advantages that young investors have over older ones is their ability to start saving early on with compound interest working in their favor.
8. Reinvest Dividends and Capital Gains
If you have been investing in a company for several years and offer dividends, don't take the cash right away. Reinvest that money back into your portfolio so it can grow even further.
Whenever you sell shares of any stock, always remember to use the proceeds from those sales to buy more companies or investments.
9. Do Not Panic Sell
Whenever the market starts to drop, you may feel tempted to sell off any investments quickly in hopes of minimizing your losses.
However, this is rarely a good idea. Those emotions will fade. Wait for things like this to pass and continue monitoring your portfolio over time before making any changes as needed.
10. Keep an Eye Out for Frauds (Especially Mutual Funds)
Be sure that invest only with reputable companies who are transparent about their business practices and how they turn a profit.
Mutual fund managers have a lot of experience. Simply knowing does not mean you are any good at your job. Staying away from mutual funds and instead choosing exchange-traded funds and index funds is the way many choose.
11. Do Your Research
Research continually. The difference between an amateur and a pro is one has researched all investment decisions.
By reading articles, watching videos, or attending webinars related to investing, you'll stay up-to-date with the latest trends and changes.
You will make more informed decisions when it comes time to begin investing.
12. Have a Long-Term Mindset
You won't get rich overnight by following any of these tips. The goal should be to think long-term and focus on compound interest, which will work its magic over time.
13. Be Realistic With Your Goals and Risk Levels
Set realistic goals rather than having lofty expectations which may not pan out as planned.
Also, make sure that you know your risk appetite and what level of market volatility you can handle before you lose money.
14. Diversify When Possible – Don't Put All Of Your Eggs in One Basket
One great way to reduce the risks is by diversifying into different investments. Diversification will help minimize potential losses if one particular asset or stock price falters over time.
Recommended: Pros and Cons of Investing in Stocks
15. Have Fun with Your Financial Goals
Have some fun when you start investing. There are thousands of companies on the stock market. Choose companies you believe in and have good fundamentals.
Best to have an investing strategy that you are curious about, not strictly financial.
16. Use Free Resources Whenever Possible
Most investing tips are accessible and free online.
Take advantage of any opportunity possible to learn before you open any investment accounts. You will understand more about the stock market and the investment strategy you want to employ.
17. Automate Your Savings
One of the best ways to ensure that you can invest money over time is by automating your savings and all investing activities.
18. Have Multiple Accounts
It's also helpful to have multiple accounts for saving and investing for various purposes. One account could be explicitly earmarked for emergency funds, while you can designate another for long-term investing over the next decade or so.
19. Treat Investing Like a Business
There should always be an investment plan with multiple strategies and goals along the way, not just one singular focus point.
20. Get Professional Help Where Needed
At certain points throughout their lives, some people may find it helpful to get professional help for their investments.
An investment advisor, CPA, and insurance agent will help you throughout your financial journey at different times.
21. Do Not Let Your Emotions Cloud Your Judgment
Don’t allow fear, greed, or panic to take over and cloud judgment when deciding where to invest. Stick to your financial goals and do not make financial decisions when hot-headed.
22. Learn How to Read a Prospectus
A prospectus is a document usually released by a company when they want to offer their shares for sale to the public. The company will disclose all the essential details about the business and its financials.
If you are considering a pre-IPO company, read the prospectus.
23. Do Not Try to Time the Market
You will fail. Don’t do it.
24. Have Realistic Expectations
You will not double your money in a month. You will double your cash throughout time and as compound interest adds.
Be realistic. Investing is like magic over time.
25. Don't Forget to Make Regular Contributions
Continue adding to your investments regularly. Most people add monthly. Find out what works best for you.
26. Become Greedy When Others Become Fearful
Warren Buffet is one of the most successful investors in history. This quote sums up his philosophy.
Be fearful when others are greedy and greedy only when others are fearful.
Buy up the fear when others are selling out of emotion (and sell when they're buying). Take advantage of this emotional outburst by others.
27. Become Protective When People Become Greedy
The opposite of Buffet's philosophy is also true. When people become greedy, get out.
Once you hear this stock/investment always goes up, this may be time to sell off and move on.
28. Avoid Investing Fads
Do not buy on hype or because your cousin-in-law said it is a good buy. Always apply fundamentals and a level head when taking any investment risk.
29. Do Not Invest in Something You Do Not Understand
Continually educate yourself sufficiently as a beginning investor. Do not put any money in the market until you understand the difference between blue-chip stock and riskier investments. You will begin losing money hand over fist.
30. Read Books and Educate Yourself On Investing
Take some time and educate yourself by reading personal finance books. You will thank yourself later.
Recommended: 3 Finance Books to Increase Your Net Worth
31. Identify Why You're Investing
Do you want to become financially independent?
Do you want to build a nest egg to retire at age 60?
Identify your reason and allow that to guide you in your investing journey.
32. Focus On Your Savings Percentage
Start with saving 10% of your gross income. Each month increase it by 1% until you are at 25%. You must make lifestyle changes to hit this number.
Once you can save 25% of your gross income, you can start putting some decent money away.
33. Understand Your Risk Tolerance
You will make different decisions at age 25 and 65. Know your risk tolerance and act accordingly.
34. Start With Broad-Based Investments
Start with broad-based investments like mutual funds or index funds. These are best for beginners and experts.
35. Trust Yourself When Making Decisions
You may not trust yourself in the first few decisions. Fear not. That will subside. Once you become competent, you will feel confident in your choices.
36. Keep Your Costs Low
Avoid high-cost mutual funds and broker fees. Use low-cost alternatives that will still give you the same results. Nearly all online brokers offer commission-free trading.
Frequently Asked Questions (FAQs)
Why Is Investing a Good Idea?
Saving money alone will not provide you with enough money to retire on in the future.
Inflation is out of control, and the one way you can avoid inflation is by investing and growing your money.
Recommended: How to Avoid Hyperinflation: 20 Actionable Tips
Where Should You Invest?
That is entirely up to you. This article will help you start with investing tips, not financial advice.
Here are a few different areas you may consider investing in:
Recommended: 20 Best Investments to Make in Your 20's
How Much Money Should You Invest?
For myself, as much as I can without starving. A personal question needs a personal answer.
Ask yourself: how much am I willing to sacrifice so I can invest?
When Should You Invest?
I’ll leave you with a quote from the legend Warren Buffet.
Be fearful when others are greedy and greedy only when others are fearful.