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Investment basics: How to start investing

How to start investing

September 26, 2013

You don’t need boatloads of money or a degree in economics to begin building an investment portfolio. Talk of stocks and bonds can be intimidating to investment newbies. But the truth is there’s really nothing scary or complicated about planning for your financial future. In fact, the earlier you start investing, the more opportunities you’ll have to take advantage of compound interest — where the interest you earn on your savings earns more interest, and so on.
Here are a few simple steps to help you build a portfolio that suits your future goals. 

Determine your financial objectives.

Not sure how much money you’ll be able to invest over the years? The first clue is what you plan on spending in the years to come. Is college in the cards? Do you hear wedding bells? At what age do you hope to retire? Jotting down these goals on a piece of paper can help you determine how much money you’ll need to meet your life goals, and conversely, how much money you’ll be able to set aside for your investment portfolio. 

Get educated.

There is no shortage of investment choices for your consideration. But while the sheer variety can be overwhelming, it’s best to start building a basic understanding of today’s most common investment instruments: stocks, bonds and mutual funds. Visit your local library to find books on investment fundamentals, scour the Internet and read the finance section of your local newspaper to become better acquainted with these investment building blocks. 

Meet with a financial advisor. 

It’s always wise to sit down with your financial advisor, who can help explain the basics and help you develop an investment plan that suits your needs. Your advisor can also help you review your financial situation and set goals for a healthy financial future. What’s more, the right contact can help you determine what type of investor you are, from a moderately conservative investor less willing to accept fluctuations in your portfolio to an aggressive investor with a stomach for greater risk. 

Begin building your portfolio.

One of the cardinal rules of building a portfolio is to ensure that you have the right mix of investments. A diversified portfolio will include some stocks or mutual funds for growth, some bonds or fixed income for stability and some cash for security. 

Revisit your goals. 

Your life goals are likely to change over time. For example, your dreams of earning a PhD may give way to plans to start your own business. That’s all the more reason to regularly re-evaluate your financial goals and adjust your portfolio accordingly.