As the stock market continues to recover, you might find yourself wondering how you can invest your personal funds and get a piece of the financial action. However, it is imperative that you do not jump straight into investing without doing ample research. After all, investing is not a surefire scheme used to get wealthy overnight, but a long, carefully executed process that comes along with its own challenges and pitfalls.
Here are some tips to guide you through your latest potential venture:
Save before you invest.
Although there are a plethora of investing services that aid you in investing with as little as $5, it is important that you do not enter your first investing experience with only $5. Experts at CNNMoney and Capital One Investing suggest first-timers save for at least six months prior to investing in stocks. This amount of money will not only get you through purchasing your first stocks, but act as a buffer for any sudden changes in the market or emergencies as well.
Stick with your stocks.
While it may be tempting to trade stocks back and forth, it is important to remember that they are not trading cards, but personal financial assets that have the ability to make and cost you money. Therefore, experts advise that you buy a stock at a good price and hold, unless something fundamentally changes about the stock’s worth.
Don’t let your emotions dictate your actions.
It is easy to get swept up in the rollercoaster of market booms and busts. However, businessman Dave Ramsey explains that it is important to remain consistent and impartial in your investing, regardless of the stock market’s current state. Such a tactic is the only way to avoid falling victim to recessions or even investing too much during times of great economic growth.
Diversify your portfolio.
In case of a sudden market downturn, it is vital to build a diverse portfolio in order to offset the effects of downside risk. Additionally, you easily can diversify your portfolio by investing in bonds and mutual funds — which can aid you in following the orthodox rule of owning 60 percent stocks and 40 percent bonds.
Maintain realistic expectations.
As mentioned before, the first true step of investing is to accept that it will neither be easy nor a guaranteed method of gaining wealth. By acknowledging that you will likely face obstacles and hardships throughout this venture, you will be more likely to make the right decisions and avoid making unbelievably costly mistakes.