Being a first-time investor can feel quite daunting, especially if you feel you have inadequate financial knowledge. The fact is that not all of us have studied business or finance related degrees and we all learn essential things along the way, so you really have nothing to fear.
Here are top 11 questions that first-time investors have answered.
Is Paying Off Debt Necessary Before Investing?
One needs to take stock of their personal risk tolerance, goals and financial situation. There is no answer to this question and you can only draw your conclusion by seeing your personal debt size, interest rates and how you will balance your investing goals with debt repayments.
Can You Define Risk Tolerance & How To Figure Out Mine?
Risk tolerance is merely how much you are willing to stake. You can figure out yours very simply. If you stay up at nights fearing that a down market may bring down your investment portfolio, then honestly, the risk is bigger for you.
If instead, you worry about missing an earning potential then you are making conservative investments. The best way to quantify your risks is to work with a financial advisor.
Where Do I Begin My Investment Knowledge & How Do I Increase My Confidence?
Most investment education is honestly self-taught and you can find a plethora of materials now for educating yourself. From online resources to scholarly journals or a single book like Bogleheads Guide to Investing, you can learn all you need here.
Basic knowledge and joining communities like Public can help will broaden your financial literacy and confidence.
What Will I Get By Investing In The Stock Market?
No market is risk-free. You must note that natural disasters, political events, consumer emotions, terrorism, earnings etc. can impact the markets. Over the long-term, you can enjoy annual return rates, corporate bonds, cash equivalents/cash and treasury bonds too.
When Is The Right Time To Invest?
The simple rule is to invest your money when you believe it will grow over a period of time. your goal must be to invest it into something that will appreciate over time, like stock shares, real estate, index fund, art collectibles etc.
Can I Lower My Risk Of Investing?
Being well diversified is one sure way of minimizing investment related risks. This method involves investing your portfolio in various assets, including cash, bonds, stock and real estate etc. Economic events have a different impact on how each of these assets will react.
Diversification is the way to ensure you get higher returns with lower risks.
How Much Should I Start With?
The truth about investing is that single stocks can cost you thousands of dollars. If you’re not up for that just yet, you can find several platforms that have removed account minimums to facilitate the beginners in investment. At the very least, you will surely get to enjoy fractional shares.
This way, even starting out with a $20 investment, including a small stock portfolio will give you hands-on experience, some returns and flexibility for your comfort level.