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The problem with budgeting is that no matter how much you can reduce your expenses to only the most essential items, you still won't be able to get more money than what you are earning.
In order to increase your income and accumulate more wealth, you must either take another job or find a way to multiply that money by investing in them.
Investments should be approached cautiously by inexperienced people. Through investments, you can earn extra money or lose the ones that you have.
To guide you on this journey we hired Minuca Elena to reach out to 25 financial experts and ask them the following question:
What are your best investing tips for beginners?
Keep reading to see what the experts had to say.
Dominic Beattie - Savings.com.au
One of the most difficult investment decisions for beginners is the decision to start investing in the first place. It’s also one of the most important.
Doubt, uncertainty, unfamiliarity, and fear tend to hold many people back from ever making that first investment, seeing them go through life missing out on a whole avenue of wealth growth opportunities.
But once you start, investing can become a good habit that you keep up for the rest of your life. Generally, beginner investors should consider investing with a long-term horizon.
It shouldn't be seen as a 'get rich quick' scheme. As the old axiom goes, it's time in the market, rather than timing the market which matters most.
So be willing to part with your cash for several years. That way, you've got time on your side to ride out any potential market dips.
Also, try to invest in what you know and understand, rather than taking a punt on something because of hype.
If you're struggling to pick a particular stock or asset to invest in, an exchange-traded fund (ETF) which exposes you to a diverse basket of stocks with one trade - such as those which track a 'top 50' or 'top 200' index - could be a simple investment to start with.
Kelan Kline - The Savvy Couple
Minimize your risk by purchasing index funds or ETFs instead of individual stocks or bonds. Index funds and ETFs are generally considered to be less risky because they contain a diverse portfolio of companies.
Owning a broader part of the stock market instead of a few individual companies' stocks helps you diversify and lower your risk.
The other benefit is that index funds and ETFs typically have lower fees, which helps investors keep more money in their pockets.
Keep an eye on your portfolio management fees and expense ratios to make sure you're not negatively affecting your investment gains with portfolio fees and expenses.
Don't just invest in the stock market, be sure to invest in your financial education. While financial jargon may be hard to understand at first, the more you learn about investing, the fewer mistakes you'll make.
Free resources like books, articles, and websites are available if you take the time to seek them out. Take advantage of tax-advantaged accounts.
This is a great way to save money over time and build your nest egg faster.
Denise Supplee - Spark Rental
Growing up in a family heavily involved in real estate investing, it was only natural that I too would follow the same path.
However, over the years and even recently, I have learned that diversification is important. Aside from retirement accounts, I wanted to learn about stock investments.
I learned by doing and setting up an online trading account. I chose a few stocks after reading about them, and then set up a document with the stock trading symbol, date, and the cost per share.
I would then log in and check on the stocks I chose. Eventually, I moved to invest small amounts of money to a few here and there.
- Do not put all your investment eggs in one basket. Diversify.
- Find respected and knowledgeable people and sources to provide assistance.
Andrew Kraemer - Wallet Squirrel
It's funny the #1 piece of advice most investors wish they would have done is invest sooner. Simply starting and making your first investment is the single most challenging thing for most beginners.
There is a debilitating fear that the stock market is too big and too complex for the everyday person to understand, but at its roots, it's just a way to invest in companies you believe will do well in the future.
I always suggest opening a brokerage account like Robinhood or something and investing $100 in a large public company you're familiar with, like Apple, Amazon, Microsoft, or the like.
You can buy a fractional share in most companies and watch how that fluctuates over a month or two. This is the biggest hurdle most beginners have, and you'll learn so much!
Adam Garcia - The Stock Dork
The first thing a beginner investor has to think about is how serious they are about committing to the investment world.
Do they want to become an active investor? Do they have the time to do so? Would they prefer a more passive approach, with their investment choices working for them?
The above questions are important as they’ll determine your overall trajectory.
Active investments means you're out there on your own - doing all the research, cherry-picking stocks yourself, and really owing the risk that you have to take.
This requires a lot of knowledge of the stock market, individual companies, and can be incredibly risky if you’re not sure what you’re doing.
A mentor and a lot of research are both recommended for this approach.
These funds offer long-term positive returns and have historically proven to be able to effectively recover from market crashes.
Now that you have a rough idea of the two approaches, decide which one you want to be, or have the time to become in the case of active investments. Remember, with investments, the younger you start, the better.
Invest with facts, not feelings. Beginners usually really too much on their gut feeling, and are too quick to liken investing to gambling or speculating when it's anything but.
Your main task is to minimize the risk, and the only tool for that is research.
Anna Barker - Logical Dollar
My best tip for beginners to get started with investing is to not over-complicate things. In fact, it's been shown that simplifying your investments can actually result in you earning more money over the long term.
This is actually something I apply myself with my own investments, through keeping the majority of my money in a broad market index fund that tracks the S&P 500.
That is, while you may be tempted to buy and sell stocks over a period of weeks or months, this can actually be far riskier given that while these have the potential to go up, there's also a very good chance that they could go down.
It also comes with added transaction costs, not to mention the time needed to manage your investments in this way. Instead, I like to set and forget.
By continuing over time to put your money in a broad market index fund (including not selling during drops!), your portfolio will be following the performance of a large number of companies.
This, in turn, can be far less volatile than buying individual stocks.
History has also shown that, overall, the stock market has gone up over time, so having your money somewhere that more or less follows this trend, rather than the ups and downs of individual companies, makes it much more likely that you'll end up better off by the time you reach retirement.
Jeremy Keil - Keil Financial Partners
The first thing to do is to pay down any excess debt, especially from credit cards. That will likely get you a better return than the stock market.
The next thing to do is make sure you are putting enough into your 401(k) to get your company’s match amount – that’s basically free money from your company!
Then make use of Roth IRAs. You can open one up at most investment companies. Start with an ‘allocation’ or ‘retirement date’ fund that manages the stock/bond mix for you.
Keep investing monthly so you get used to putting money aside every month and make use of something called ‘dollar cost averaging.’
Invest a consistent amount each month and if the market goes up you buy less shares at a higher price, but if the market goes down you buy more shares at the lower price.
Omer Reiner - Florida Cash Home Buyers
1. Start Slow - In general, it’s a good practice to spend a few weeks/months simply observing the market of the asset that you want to buy.
For instance, if you want to invest in stocks then you should spend (at least) a month or so simply watching stock prices.
This way you can see how stocks react to different types of information. This also lets you learn from any potential mistakes before actually putting your money at risk.
2. Don’t take on too much risk too fast - Speaking of risk, try to avoid taking on too much risk when starting out. This means avoiding margin (borrowed money), volatile assets, options, etc.
3. It’s okay to make money slowly
A common beginner mistake is expecting that you need to double your money overnight. It’s important to understand that a good return is usually about 10% per year.
If you don’t make a killing in your first week of investing, don’t get frustrated. Just trust your investing process and give assets time to grow in value.
Marco Sison - Nomadic Fire
My number one piece of advice for people new to personal finance and investing is - START NOW! I mean right now, as in today. I cannot stress enough how powerful time affects wealth.
The money invested today starts earning money; that money then produces even more money.
The more time money is invested, the higher the exponential growth.
This financial magic is called compound interest. Albert Einstein called compound interest "mankind's greatest invention," and that "he who understands it, earns it."
As a simple example, $100 invested today at 10% grows to $110 after one year. If the money stays invested, after two years, the investment equals $121.
With no additional work or investment, the original $100 is now worth $11,739. The combination of Time + Compound Interest is the most powerful tool you have to build wealth.
Sam Zelinka - Government Worker
My best tip for a beginning investor is to start as soon as you can. You will never be as young as you are right this second. That means that your investments have the maximum time to grow and compound if you start now.
You might not feel like you can start investing today for many reasons.
Perhaps you are scared to start because you don’t know everything there is to know about investing. Or maybe you think that you should wait until all your debt is paid off to start investing.
While those are valid feelings, delaying investing will only shrink the time that your money can compound and your total return.
For example, if you put $100 a month into an index fund that tracks the S&P 500 every month over the past 10 years, you’d have over $24,000 and would have more than doubled the money you contributed over that timeframe.
While there’s no wrong time to start investing, the sooner you start investing, the sooner your money starts working for you.
Bill Samuel - Blue Ladder Development
The biggest mistake that I see new investors make in regards to real estate is that they don't buy the property correctly.
Most newcomers to the industry underestimate how competitive the market is and how difficult it can be to find a property that offers a good return on investment.
Oftentimes new investors will become impatient during their search and pay too much for a property or they just don't know their (expected rent, expected repairs/cap-ex, expected vacancies, etc) numbers well and end up with a much lower ROI than they could get investing the cash elsewhere.
Allison Stewart - Harvest Returns
Some of the best advice I received in my early 20s was to start saving for retirement as soon as I enter the workforce.
Though, before committing capital towards your retirement portfolio, it's important to create a well-defined investment strategy.
The stock market is where a majority of people invest their money, but is that really the safest place for it? Part of your investment strategy should include diversifying your portfolio to protect it from market volatility.
Alternative assets, like agriculture, are typically negatively correlated to the overall stock market, acting as a great hedge against inflation.
Historically, agriculture has produced solid returns compared to other asset classes.
If you want to consider the impact your dollars are making, investments in private agriculture deals can have an enormous positive influence on a family and community.
Scott Bates - Money And Bills
I like to follow the investment advice from Peter Lynch and billionaire investor Warren Buffett. You can search on YouTube to see their various interviews and learn a lot about Stock, ETF, and Mutual Fund investing.
My favorite takeaway from both of these experts is to invest for a period of 10-20 years or more.
Also, Peter Lynch says to invest in companies competing in an industry you actively work in and have specialized knowledge with.
Warren Buffett recommends investing in blue-chip companies with strong balance sheets.
For my own investment portfolio, I’ve personally followed both of these strategies and maintained an average return rate of 20%.
If the overall markets level goes off or we have a recession, I’d expect that the average return to drop, however. That would then create an excellent buying opportunity for the next run-up in the coming years.
Adam Smith - Saxo Markets
Pursuing a diversified, balanced portfolio will better protect you against over exposure to any one asset class.
For more volatile asset classes, including crypto, it is important to ensure that the allocation of investment is sensible and that the potential risk of investment is offset by a greater investment in more stable asset classes, including real estate and equities.
By and large, allocating around 7% of a portfolio to crypto is appropriate, as is investing in the currency fractionally.
Buying a whole bitcoin can be a rather large exposure for the average retail investor, so a trusted and regulated way to benefit from crypto is to trade it as a currency pair or via an ETP (Exchange Traded Products).
This offers a fractional investment approach that is fundamentally less risky than buying the currency.
Additionally, in trading ETPs or Crypto FX pairs, there is no need for a crypto wallet, meaning you don’t own or store the underlying coins.
This negates worries about crypto exchange hacks or losing access, which is important as stories of access to cryptocurrency wallets being lost to dramatic effect have been widely reported.
Building the remaining 93% of your portfolio you should look to incorporate:
- Real estate
- Fixed income
There is no one-size-fits-all solution to investing, and doing your research is vital to ensure you make informed investment decisions.
When it comes to volatile assets such as cryptocurrencies, balancing these within a diverse portfolio will ensure you are in an optimal position to reap the rewards, while minimizing your exposure to unnecessary risk.
Ara Zohrabian - IFCMarkets
Don't Fall In Love With A Stock
In the history of modern financial economics, the rationality of financial markets has been a contentious issue.
There might be a handful of negative market indicators, yet many investors keep making the same mistake, investing in the same market until it’s too late.
Your ego will get you on a revenge path, forcing you to make investment decisions against strong facts and common sense. The stock market is not for you if you lack a sense of humility and have a hard time accepting that you were wrong.
Your experience or lack of experience doesn’t matter when facts change, and you need totally different skills to correspond to new conditions.
Ask yourself “What is this company’s reinvestment strategy?”
After you have put your dollar into a company monitor the reinvestment strategy of the company. A good company to invest in is the one that keeps putting money into their business, therefore multiplying investors’ profit.
Detect real value stocks
Sometimes beginner investors tend to buy a small stock just to have a position. For some financial instruments, like cryptocurrencies, it works, in other cases, the stock value doesn’t justify the real value, so they look for other ways to gain value from that investment.
Look not at the moving picture of a stock, not the snapshot of it.
And always remember that economic history is cyclic. Everything that happened before will repeat itself, both ups and downs.
Jacob Sensiba - The Free Financial Advisor
My best investing tips for beginners are start early, be consistent, plan ahead, construct portfolios based on risk tolerance, and have conviction.
The earlier you start the more time you give compound interest to work its magic.
Investing regularly does two things: buys more securities so you have more to work with and gives you the ability to dollar-cost average if your investments are losing value.
Assessing how long you’re able to let your investments grow is important as well – if you have time, you can be more aggressive and patient, but if you don’t, you need to be more picky and conservative with your investments.
Which brings us to risk tolerance – figure out what amount of risky investments makes you uncomfortable, and determine what the risk/reward dynamic is.
Do your due diligence, pick your investments, and then have conviction in your decision.
Baruch Silvermann - The Smart Investor
The first thing you should do is to determine what kind of investor you are.
Are you willing to take chances? Do you envision yourself being able to actively participate in the market multiple times per day? If this is the case, you may want to pursue an active investing strategy.
Active investing entails focusing on the present rather than the long term horizon. Active investors focus on specific stocks and use good market timing to try to outperform the market in order to profit mainly in the short term.
It is necessary for an investor to constantly monitor the market and his position in it.
If you're a long-term investor, you're in it for the long haul. Passive investors reduce the amount of buying and selling in their portfolios, ensuring that their investment strategy is cost-effective.
This is essentially a buy-and-hold strategy. It is frequently necessary to resist the urge to react to or anticipate the stock market's constant movements.
Investing in an index fund that tracks one of the industry's major indices, such as the S&P 500 or Dow Jones, is the best example of a passive approach.
Justin Nabity - Physicians Thrive
Have investment goals: to start investing, first, you need to set your goal of why and how long will you be investing for.
For example, are you going to invest in order to make money for a vacation or are you investing for long-term purposes such as retirement? Having investment goals will keep you motivated and focused.
Diversify your investments: as you understand by the metaphor “don't put all your eggs in one basket” it is important to diversify your investments.
If you take the example of the stock market, it is always fluctuating. So when diversifying your investment portfolio, there will be fewer chances of you losing all your money.
Kris Lippi - ISoldMyHouse.com
As an investor myself and someone selling properties that serve as investments to some as well, here are two of my top tips for beginners:
Have a budget.
Just like any other financial decision, having a budget specifically for your investment needs is a must.
Setting a budget will help you control your activities and will also help you track how much you’ve already spent and how much you have left to spend. Investing requires planning and with a budget, you are well on your way.
Do your homework.
There are lots of people who can entice you to invest in something - they can show you lots of proof and tell you amazing stories about how their money grew and how you can make your money grow too.
However, you have got to have a personal understanding of what you’re getting into before making the first move. Do your own research and make sure you really know the ins and outs of the investment product you’re planning to buy before anything else.
Ed Cravo - Groundbreaker
Many people are quick to jump in with investing and excited to put their money to work. But quickly, they can find themselves losing money or at unnecessary financial risk.
These tips on investing money for beginners are straightforward and to the point, proving you can take the complication out of how to invest for beginners.
1. Goal - Getting rich should not be your goal, that will lead you down some sketchy paths or can cause you to make poor choices. Know why you are investing your money or what your goals are, to avoid making mistakes and losing sight of the big financial picture.
2. Timing - Don’t wait for the ‘perfect time’ to start.
3. Patience - Learn to accept that your investment will lose money some years, and if it does, it doesn’t mean you’ve done anything wrong. In fact, it likely means the opposite: You should add even more to it while it’s on sale.
4. Knowledge - Always invest in the things you understand first. Blindly following the herd may strike you gold, but odds are you’ll lose money before winning.
Shawn Plummer - The Annuity Expert
My best tip is to diversify your portfolio if you have a significant amount to invest.
If you're looking to invest for retirement, consider an annuity as that can be a good option if you're looking long-term.
A fixed indexed annuity is a fixed annuity that earns interest based on the performance of a stock market index such as the S&P 500, but you don't lose money in a stock market crash because it is ultimately an insurance policy.
The market performance is just used to determine the compound interest credited to your annuity each year. You also don't have to pay huge fees.
Another big reason why people allocate some of their portfolios to annuities is because it can guarantee future income during retirement.
Corey Noyesn - Balanced Capital
My advice to beginners is to keep it simple and put it on autopilot. What I mean by that is first, don't try to overthink your investments.
Choose a low-cost index fund that is diversified across markets.
Then put it on autopilot by choosing a set amount you will invest on a certain day of the month and set it up to be automatically deducted from your bank account.
Paul Knag - RateZip
Start now even if it means starting small. There are a million excuses to wait, and you need to ignore them. The sooner you get started, the more you'll be able to invest and the more time you'll give your investments to grow.
Keep it simple at first. A low-cost mutual fund or ETF that tracks a large index of stocks, such as the S&P 500, is suitable for most beginners.
The amount you invest and the amount of time you’ve invested will have a bigger impact on your results than which fund you buy, and you can always change course as you gain experience and comfort.
Focus on how much you're saving, which you can control, over your investment returns, which you cannot. If you're able to save and invest a high percentage of your earnings, the returns will usually take care of themselves.
Automate wherever you can. Send a set percentage of your paycheck into a savings account, make automated investments into your portfolio, and so on.
The less that you need to directly focus on, the less likely you are to be overwhelmed and start making bad decisions.
Asher Rogovy - Magnifina
Don't trust anonymous stock tips. Anyone providing advice without also providing their identity may be trying to manipulate you. The risk of prosecution by regulators is essential for keeping people honest..
With so many brokers offering $0 commissions and fractional share trading, there are no more financial barriers than having a bank account.
It's now possible to manage a portfolio of any size without losing any gains to brokerage fees.
Fractional share trading also allows small investors to practice proper diversification without having to put too much into a single share with a high nominal price.
Start practicing early. Investing is a skill that requires time and practice to master. From an investment research perspective, the only difference between a small trade and large trade is a couple of zeros.
Becky Blake - Twenty Free
Contribute as early as you can. The most powerful force in the world of investing is time – and compounding, which works by earning interest on your original investment every year.
The longer you wait to begin investing, the harder it will be for your investments to make up for lost time and grow into a sizable nest egg.
So start saving today, no matter how little you have to invest.
Don't try to time the market! It's impossible to predict when markets will go up or down. This is why it's important to maintain a long-term mindset and contribute consistently over time.
Also, don't stress about every market fluctuation or pull your money out in a panic. Anyone who invested in the stock market before November 2016 lost money (the Dow Jones fell by 10% during this time), but since then the Dow has risen 22%.
Keep in mind that if you panic sold when the market dropped, you would have locked in your losses and lost out on subsequent gains.
Don't invest more than you can afford to lose. Understand that if you are investing in something, there's always some kind of risk, whether it be losing your investment or not making any money at all.
Understand the specific risks involved with each investment before deciding on one.
Additionally, don't invest money that you will need in the short term.
If you need money in less than 5 years for something like a house downpayment, it is best to keep that cash in a high-yield savings account instead of exposing it to the risk of losing it in the stock market.
Bowen Khong - Forex To Stocks
Avoid buying based on news, friends, or media recommendation, or any sort of price chasing. Investors who are just starting should invest in their education, learn the ins and outs of the financial market, and have an emergency fund set aside.
The market can go south at any time especially where people least expect it, and the last thing you want to do is sell at a heavy loss due to market crashes.
Being educated about the financial market and having a proper risk management plan will help you make independent and objective investing decisions, and avoid expensive mistakes caused by knee-jerk reactions.
As always, one should always start with money they can afford to lose, which means limit your investment capital to a lower amount until knowledge and confidence increase.Lastly, investing is best conducted when you have a long time horizon rather than hoping it can pay off your next month's credit card loan. As for the latter, it is called gambling.
Thank you so much to all the experts that have contributed to this expert roundup! Please share this post on social media with your friends and followers!