investing

How to Make Your First Investment

first investmentIf you’re in your 20s or maybe even your 30s you may not have started investing yet, but you know what?  It’s never too late to make your first investment.  If you haven’t started investing yet, let me ask you a question, what’s stopping you?

Maybe you had student loans to pay off, maybe you wanted to focus on building an emergency savings fund or maybe you’re just scared to invest your hard earned money.  If you turn on the news you always see a story about how people, make big money by investing and how people lose big money in the stock market and that can be scary.

The truth is investing doesn’t have to be extremely high risk and you don’t have to be afraid of it.  All you need to do is invest wisely.  That means something different for everyone when you make your first investment.  What’s best for you may not be best for your BFF and vice-versa.

Here are easy tips to help make your first investment:

Do research your investment options.  The world is full of all kinds of investments, there are stocks, bonds, mutual funds, ETFs and precious metals, just to name a few.  Some investments are extremely high risk and others are very low risk.

Finding the best option for you depends on how comfortable you are with risk a.k.a. the fluctuation in the value of your account, how long you have to invest a.k.a. your time horizon and your investment experience/knowledge.  Before you invest in anything, or even decide which type of account to open, read all about the investment and make sure it aligns with your goals.

Don’t take advice from your neighbor.  As a financial planner I can tell you that this happens often, but it’s a huge mistake.  Don’t make your first investment based off a tip your neighbor gave you over the fence or advice your co-worker gave you at the water cooler. What’s best for them may not be best for you, and that’s the truth.  Also remember that if your neighbor made money with an investment they probably bought it months or years ago (i.e. buy low and sell high).  If you buy it now the price is already high and there’s no guarantee, you’ll make money.

The better option is to seek the advice of a professional financial advisor (and I’m not just saying that because I’m a financial planner).  Talk to a professional about your goals, how much you have to invest, how long you want to save (i.e. short term goals or long term for retirement) and how comfortable you are with the value of your account going up and down.  This will help determine which type of account you should open as well as which type of investments to buy.

Do start small.  Many people avoid investing because they think you need to be a millionaire (or even have thousands of dollars) before you make your first investment.  This is absolutely not true.  Unless you inherit a lump sum of money or win the lottery, most people accumulate their fortunes over time.

If you want to start investing, then just do it. Make your first investment today. Open an account, make a small deposit and contribute regularly through pre authorized contributions.  Before you know it your savings will add up and you’ll be well on your way to building a net worth.

Don’t put all of your eggs in one basket.  A classic rookie investment mistake is getting a “hot tip” from a family or friend, jumping on the opportunity and putting all of your hard earned money into one type of investment.

A better option is to diversify your money in a well balanced portfolio such as a mutual fund or Exchange Traded Fund (ETF).  These are pre-constructed investment portfolios that hold several different investments in one place, it’s a portfolio of stocks and bonds.  As the investor you can choose the best portfolio based on your needs such as risk tolerance and time horizon.

How did you make your first investment?

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