How To Invest Money For The First Time
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For those who are looking to invest in the stock market for the very first time, the prospect of losing it all can be a little terrifying.
It’s good to read up on how to invest in the stock market a little first, and the books don’t really have to be expensive when you use a Kohl’s coupon from Discountrue. However, there is simply no substitute for jumping in with both feet. Let’s start by taking a look at the four most important factors to consider before choosing an investment strategy.
Many people want to set their investments and forget them. But for true success, you will need to track yours on a consistent basis – otherwise you set yourself up to risk.
Don’t make the mistake of assuming that one percent fee is negligible. Even the smallest costs add up over the course of time. While cost shouldn’t hold you back from investing you also don’t want to spend more than you should.
It is never smart to put all of your eggs into one basket, so to speak. Stocks and bonds are both sound investments and more money needs to be placed in stocks over the long term.
No stock should be invested in as a get rich quick scheme. Investments must be made with the next five to ten years in mind.
For first time investors, there are three simple investment strategies that can be employed and all four of the aforementioned criteria are easily met. Read on to learn more.
Create a Retirement Fund with a Target Date
This strategy allows investors to experience immediate diversification as soon as they invest. A target date retirement fund automatically splits the contributions that are made into a number of different stocks and bonds. No re-balancing of the investments is needed as you age and these funds are available at the vast majority of modern workplaces. All of them are not created equal, but they offer a great way to begin investing.
Also known as a robo-adviser, an automated investment service takes a lot of the guesswork out of the process, especially for those who are unfamiliar with the ins and outs. The only cost to the user are the underlying ETFs (exchange traded funds) and 25 basis points. A user simply needs to decide how much they would like to invest in bonds, as well as stocks. After the user makes these choices, the automated investment tool takes care of any necessary re-balancing and reinvestment.
Three Fund Portfolio
While the two aforementioned strategies are geared towards those who do not have the time or the capability to take a more hands on role in their investments, a three fund portfolio allows the investor to take a more active role during the latter stages. There are only three asset classes included: foreign stocks, US stocks and US bonds. Since the asset allocation plan is so simple, even the most inexperienced investor can navigate this investment strategy with ease.
Photo courtesy of: NikolayF
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