Investing · January 07, 2021

What to Consider When You're Starting to Invest

Investing is one of the most effective ways to build wealth and grow your savings. But learning how to start investing can be intimidating. Whether you're investing for the very first time or want to review the fundamentals, these tips can put you on the right track.

Identify your investment goals

Before you start investing, it's important to consider what you want to achieve. With a clear sense of your goals, you can figure out which investments make the most sense. Ask yourself these key questions.

Why do I want to invest?

Whether it's for retirement, a new house or your kids' college fund, write down your goal for the investment. Be specific. Estimate how much you need to accomplish your goal and when you'll need the money.

How much can I invest?

Different investments require different amounts. If you want to buy rental real estate, you'll need sufficient funds to make a down payment. With stocks and bonds, on the other hand, you could potentially open an investment account for much less.

What's my risk tolerance?

Investing is a tradeoff between risk and return. Assets that have a greater long-term earning potential—like stocks—are also more likely to lose money in the short run. Would you be able to stomach the short-term losses, or would you prefer to play it safe, even if it means needing to save more?

How do I want to be involved with investing?

Some investments take more effort than others. If you design your own portfolio and day trade, it takes research and time out of each week. On the other hand, mutual funds are managed by a professional investor and take less work on your end.

Resources to get started

To start making investments, you need a brokerage account. This lets you process trades to buy stocks, bonds, mutual funds and other assets. Most brokers will provide resources on their websites to help beginners get started.

Not only will these materials walk you through how to open the account, they also should explain how to find the right investments for your goals. For more help, you could contact their customer service to discuss your new account with one of their representatives.

Besides using the broker materials, you could study on your own with investment books, videos and courses. Investment organizations like the Financial Industry Regulatory Authority and the North American Securities Administrators Association also have their own libraries of training materials to help beginners get started.

Investing fundamentals

While your exact investment strategy will depend on your unique goals and risk tolerance, there are some key fundamentals that apply across the board.

  • Reduce risk through diversification. It's important not to put all your investment eggs in one basket. For example, if you only buy stock in one company and then they go bankrupt, you lose all that investment capital. Instead, it's safer to diversify your portfolio, investing in a large mix of different assets with various levels of risk.
  • Pay attention to fees. Investment fees can sneak up on you. They're automatically deducted from your portfolio, so you might not realize how much you're paying each year. Read the fine print before using a broker to compare their fees against others.
  • Keep your emotions in check. Market news can be an emotional roller coaster. During boom times, it's tempting to buy too much, and during a crash, people can panic sell. Try to stick faithfully to your long-term investment plan.
  • Consider broad investment funds. As a beginner, it can be difficult to pick your own profitable investments. Mutual funds and exchange traded funds could be an easier way to get started. When you buy into a fund, you buy into a portfolio managed by a professional. You can pick a fund that seems to fit your goals, like retirement in 30 years, and then the fund manager will handle the investments.

The value of a financial advisor

For more support with starting out, consider meeting with a financial advisor. They can help you establish your goals, lay out how much you need to save and suggest investments that would be appropriate for your portfolio.

After getting your initial plan, you can decide whether you still need their help or want to handle investing on your own. However, this first meeting will make sure you get started on the right foot.

Investing is a long-term process and it pays to spend a little time figuring out what to do before you jump in. By studying these concepts, finding the right educational materials and considering an advisor, you will be well-prepared to start investing.


A few financial insights for your life

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This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.