There is a saying that bad investment decisions are akin to a tax on intelligent people who commit stupid actions with their money. Also, strategic investing become more prohibitively expensive as we age. If you wait until you are in your mid-40s to begin investing, you will have to save over three times as much money than you would have in your early 20’s.
That is what I learned as a recent small-scale investor. If there is a piece of advice that I can offer a first time investor, it’s this – relax. Don’t stress out too much about it. (Unless you have the investing acumen of a wanton Las Vegas gambler that is.) You should consult a financial professional. Research what you invest in. Diversify your investment portfolio. React to financial market conditions, not panic.
Investment is a long-term waiting game. Waiting to see if you can recoup your initial investment and profit as well. This is a process that can take years. Your keywords for investing are strategy and patience. The truth is that investing can be kind of boring. View investing as a long game instead of stressing about profits. Or getting rich quick.
First Time Investor? Research and Consult an Advisor
Many new investors invest blindly. Or based on popular culture or market hype. Then they hope for the best and stress themselves out in the meantime. Never invest blindly. Thoroughly research the product or company that you are investing in. Most new investors stress themselves into graying their hair prematurely because they know that they are gambling more than strategically investing.
Another stress-inducing factor in novice investing is lack of confidence. Especially if you have never invested before. Most people spend months or years being instructed on how to drive before attaining a license for example. You are not going to become an investing expert in a few weeks or months. Consult a financial advisor and/or investor. Learn the basics from an expert.
It Takes Time To Raise Capital
The current inflation rate is almost 3%. Despite popular opinion, your home is not a viable investment vehicle. Not unless you always keep it aesthetically and functionally maintained. Which within itself is a high expense.
Unless you are born rich or marry into royalty it takes time to raise enough capital to begin investing. It is better to save for a few years to raise investment capital than to lose a home or small fortune overnight on stress-inducing investment gambles.
Diversification
Research and learn about several companies and/or products that you may want to invest in. I have mentioned it several times before but investing requires patience. Never invest all of your capital into one company or product. If your investing stake went bankrupt or out of business, you could lose all of your money. Investment diversification strategies will keep you from losing everything at the very least.
Focus on Patience Instead of Stress
Just like I did, accept that investing is a boring practice that requires long-term patience and strategic financial thinking. Slowly develop investing strategies based on achieving long-term goals. Never invest based on your gut instincts or hype. Slow, steady, strategic and boring always wins the race.
Do you have any advice for a first time investor? Share with us in the comments below.
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.