« back to Personal Finances

DIY Investing: 5 tips for new investors

DIY Investing: 5 tips for new investors

November 25, 2013

Why wait to get started on building an investment portfolio? After all, the longer you invest your money, the longer your savings has time to grow. The good news is you don’t need a degree in economics to figure out the ins and outs of investing.

Here are 5 quick tips to help you get started:

Assess your investment style

Are you willing to risk it all on the off-chance you’ll make loads of money? Or do you tend to be cautious and conservative when parting with your hard-earned dollars? Deciding whether you’re a risk-taker or risk-averse is the first step to determining your intestinal fortitude for investing. 

Educate yourself

These days, there’s no shortage of resources to teach you the basics of investing. Your newspaper’s finance section, websites and trade journals are all excellent ways to gain a grasp of investing jargon.

Start safe

As excited as you may be to start investing, it’s always wise to begin small. For example, while some equity investments promise high yields, newbies may prefer to start with mutual funds or index funds. That because these types of investment instruments tend to be well diversified which can significantly reduce risk. Better yet, start investing tiny amounts of money like $50 or $100 here and there to find out how it really feels to win – and lose – your money on the market. 

Create a budget and timeline

Investing your money isn’t a right; it’s a privilege that comes with excellent financial planning and smart saving habits. So before you start investing, sit down and figure out your goals, what your investing time horizon is, how much risk in  your investments you can tolerate, and just how much disposable income you have to invest. Mutual funds are a great way to get into the market. Investing in individual stocks can require you to spend time conducting research and tracking fluctuations. 

Diversify, diversify, diversify

It’s the mantra of all great investors: diversify! It doesn’t matter how much you’re investing or for how long – maintaining an array of investment types, from equities to the more boring fixed income investments, will help you reduce risk over time and increase your ability to take advantage of market gains. Better yet, be sure to adjust your investment portfolio over time. Perhaps you’d like to add to one fund or sell another. 

Whatever the decision, let your current income, retirement plans and savings goals be your guide.