If you’re considering getting into an investment, you probably don’t know what to invest in or where to start. Today’s investment world can be intimidating, especially for first-time investors. As a beginner with little knowledge about various investment avenues, you can quickly fall for a product that promotes aggressively. Nonetheless, such a product may not meet your investment goals or may become unsuitable at a later phase. One investment mistake can cause distress and result in loss of funds. To avoid making costly investment decisions, here are five handy tips you should keep in mind when starting an investment.
1. Audit your finance before you begin investing
Before taking the risk of starting an investment, you must first feel financially stable and establish a plan. Before you get started:
- Identify your monetary goals and then quantify them. Determine what you want to accomplish and how much it will cost you. Finally, prioritize your objectives in the order of urgency and importance to you.
- Know your cash flow. It’s crucial to understand the amount of money you earn each month and how much you spend. That way, you will ensure your savings, and eventually, your investment remains consistent.
- Reserve an emergency fund. An emergency fund refers to the cash you can fall back on when something pops up unexpectedly.
2. Use your retirement accounts
Retirement accounts come with many tax advantages. In some instances, initial investments, including 401 Ks and IRAs, are tax-deductible. Others demand you to pay taxes beforehand, but not when you take your money during retirement. Also, ensure you determine if your employer matches your retirement deductions.
3. It’s not a must you be a professional
If you’re considering investing beyond your retirement accounts, there are many investment avenues that can help. You don’t need to be an expert; you only need to identify an investment avenue and stick to it. If you don’t know how to analyze markets, consider investing in monthly programs and platforms that offer advisory services. You can also consult with a professional. A financial advisor can help you overcome any uncertainty, and advisors are not only for established investors. However, ensure you vet your advisor. Ask about their certifications and if they’re fiduciary.
4. Identify your time horizon
Various people have different investment objectives: retirement, building a new home, paying for your children’s education. Irrespective of your goal, determine your time horizon or how long you plan to take before you need the money. Time horizon can help you determine how much risk you can take. With an extended time horizon, you can take more risks. By determining when you need to use the funds, you will better understand the investments you want to start.
5. Automate your investments
Once you get ready, automate the investment process as much as possible- set up automatic retirement contributions, savings deposits, and monthly investments. The investment process will be less overwhelming if you have less to do. You can establish automatic investment plans through Financial Mappers Software. This way, you’ll avoid stalling and invest constantly.
Although starting an investment can be overwhelming, the above-outlined tips can help you get started. Once you start, things will get easier with time, and your future self will appreciate you for it.
Eric Reyes is a passionate thought leader having been featured in 50 distinguished online and offline platforms. His passion and knowledge in Finance and Business made him a sought-after contributor providing valuable insights to his readers. You can find him reading a book and discussing current events in his spare time.