Whether you are 20 or 75, it is never too early or too late to start investing. However, with millions of investment opportunities appearing every day in the stock market it can be hard to figure out just where to start.
Investing can be risky. However, it doesn't have to be complicated. Before you start your investment portfolio, here are five things that you should know.
Have a Concrete Goal
Often, if you are not a professional investor, you are investing with the goal of being able to retire comfortably or make a little extra cash. These goals, while good, can be too open and leave room for errors. It is essential to make sure your portfolio reflects your specific goals, the amount of risk you are willing to take, and the time frame in which you want to achieve your goals.
Keep the Risk in Mind
You need to understand that investment will ALWAYS come with risk. There’s a risk that you won’t get the return that you want or that you won’t get a return at all. While often the level of returns can outweigh the level of risk, it’s not always the case, and it is critical to plan for these possible risks. Be sure to weigh the risks of your portfolio to reflect what you want.
Be Sure to Diversify
You know that saying, “Don’t put all of your eggs in one basket?” That saying can easily be applied to your investment portfolio as well. Asset allocation is vital in developing a stable portfolio that will achieve your desired goals. Some experts, such as the writers or WiserAdvisor.com, even recommend that investors should not put more than 10% of their money into their company stocks or within an individual stock. Not only does limiting yourself to one stock increase your risks, but it also limits your prospective success since your return is entirely dependent on that one stock.
Just Because It’s Successful, Doesn’t Mean It Will STAY Successful
While many new investors might start investing in large (and often successful) companies thinking that it will be a secure investment, it is not always the wisest choice. These companies can falter in the stock market just as much as smaller companies and can be limited in how big they can grow. If these big companies make up a large percentage of your portfolio, be sure to diversify before it harms your portfolio.
Invest in an Advisor
The most important thing to consider is investing in an advisor. A financial advisor can have valuable knowledge about what investments with be higher risk or possibly have a higher reward down the line. Plus, they can be readily available to answer any questions you might have, saving you time, money, and a lot of confusion.