I love the investing for dummies series. It really lays things out easily so that anyone can figure out exactly how to do something.
Well, investing is something that everyone should do, and it's not quite for dummies. It can be a little daunting to figure out, especially considering that it requires you to risk your own money for potential future returns. But, at the end of the day, if you want to grow your wealth over time, you need to start investing.
Getting Started Investing for Dummies
To start investing, you first need to figure our your goals:
- Are you investing for retirement?
- Are you saving for something in the near future?
Once you know why you're investing, you need to open a brokerage account. This is the actual account that holds your investments.
Here's a list of companies that allow you to start investing for free.
Once you've opened your first brokerage account, you need to fund it with money. Remember, if you're going to invest for retirement in a retirement account, there are limits on how much you can contribute to your account each year.
Placing Your First Trade
Once you've funded your account, your money is just sitting there in cash. At some brokerages, they may sweep your money into what's called a sweep account. That's okay, its just like a savings account while you're not doing anything with your money.
But you need to do something! You need to place your first trade!
You need to decide what you're going to invest in. If you're going to invest in individual stocks, you need to really do your research. There are a lot of great resources for more advanced investing topics in Investing 101. That's where you can get in-depth resources on trading stocks.
For most new investors, you're better off investing in a broad based mutual fund or ETF. I've put together a great list of reasons for investing in ETFs instead of individual stocks if you're curious as to reasons why.
A great guide for getting started with an ETF is The College Student's Guide to Investing. This is a great tool to get started.
Following Up on Your Investments
Once you've placed your first trade, you're not done. A lot of people think that investing is set and forget – and it really isn't. While investing in mutual funds and ETF is much less hands-on, you should evaluate your portfolio at least once a year, if not once a quarter.
So, after you've invested, here is a detailed list of what you need to do after you place a trade.
Then, you should think about setting up automatic investing.
Finally, you should realize what dividends are and when dividends matter.
Troubleshooting Investing for Dummies
Losing money, especially as a new investor, can be a huge challenge. It's emotionally draining realizing you've lost money, and you could panic. However, panicing while investing is even worse than doing nothing.
Also, the reason most people lose money when investing is because they've made some type of mistake. If you're following investing for dummies, you're trying to avoid these mistakes. So, check these out:
General Advice for Investing Dummies
When getting started, it's important that investing dummies keep some simple tips in mind.
First, you don't know everything. Confused by something, check out my Newbie Trader's Guide to Investing Jargon.
Second, you are dealing with transactions over the internet. Make sure you protect your investment accounts from hackers.
Third, financial advisors don't always have your best interest in mind. Make sure that you are fully aware of what people are doing with your money if you're not going to do it yourself. You could end up getting yourself in a lot of trouble or falling for an investment scam.
Finally, follow The College Investor to stay up-to-date on the latest trends in investing. You will learn, you will succeed. Sign-up below for my newsletter!