How To Start Investing Money for the First Time

by Maggie Bloom Freelance Writer

How To Start Investing Money for the First Time

Image: Envato

There are plenty of ways to use your money. You can spend it frivolously, save it, put it in a fund for college, or purchase a home or car. On the other hand, many individuals decide to put their money into stocks, mutual funds, or startup businesses.

More than half of Americans invest in stocks. This is a percentage that hasn't changed since 2010. Even the ups and downs of the investment market during the tumultuous year of 2020 didn't deter them.

Some of these individuals invested money for the first time. While some were successful, others failed due to several circumstances. For you to avoid the latter, here are the steps needed to start investing money for the first time.

Determine The Investment

This can be harder than you think. Today's market has more ways to invest money than in the past. Of course, the purchase of stocks is the most common of these.

However, you can also place your money into mutual funds. These are groupings of different stocks that range from safe to incredibly risky. Usually, mutual funds are found in the form of a 401(k) or IRA.

Then there's an investment into a startup business. Here, your return on investment isn't in the form of cash. Rather, it tends to be converted into a share of the company.

Know The Language

You can't go into a first-time financial investment without knowing the language. Even a common understanding can help make the right choices.

Using a startup business as an example, you want to understand the meaning behind a convertible note definition. The reason is companies like Assurance with these investments can transform debt into preferred stocks.

If you invest in the stock market, you want to know terms like a bear market, bull market, moving average, and Initial Public Offering (IPO). All of these relate to how a stock and the market do daily.

Do Your Research

You don't purchase a home or a car without doing some initial research. If you didn't ask for a home inspection, then you wouldn't know about potential issues. If you didn't take a test drive, then you wouldn't know how the vehicle handled in different environments.

The same goes for investing money. No matter if it's stock for a company you like or a startup that seems interesting, you need to invest time in learning everything you can. While the startup looks okay, you might discover its founder failed with three previous businesses.

However, it doesn't mean it's a poor investment. Though the owner had failures, you might like their new product. Therefore, you take a chance with your money. Research helps you understand the risks you're about to take.

Start Small

Investing your life savings into a stock or company isn't the way to go. First, you put yourself and your family at risk. Second, you'll panic each time the investment starts to falter.

Invest in a small amount of money to start. Instead of all your life savings, look at using a tiny amount -- between five and 10 percent. As your investment makes money you can use the profits to invest in other items. As a result, you maintain your cushion.

Keep Calm

After the initial investment of money, you'll have an uncontrollable urge to constantly watch its progress. You'll be elated as the stock goes up or the business makes a profit. Then, without warning, the investment will start to falter, and you'll go into a panic.

Resist the urge to constantly watch your investment. It takes time for it to mature. There are going to be down and up moments. However, if you did your research and wisely invested, there will be more positive results.

In the end, think of investing money for the first time like your first home. As you made improvements to the property its value continued to increase. This didn't happen overnight. It took time and sweat investment to make it happen.

The same goes for financial investments. The more work you put into them over time the better they will become. Eventually, they'll have a profitable life of their own.

Sponsor Ads

About Maggie Bloom Advanced   Freelance Writer

9 connections, 4 recommendations, 114 honor points.
Joined APSense since, June 23rd, 2020, From Orem, United States.

Created on Nov 17th 2020 16:27. Viewed 343 times.


No comment, be the first to comment.
Please sign in before you comment.