For the average person, investing can seem like an intimidating concept. “How do I figure out what to invest in?” “How much should I invest, and how often?” “What are the best accounts to open up?” “What happens if I lose all my money?” These are just some of the questions aspiring investors are likely to ask, but getting answers isn’t always so straightforward.
Those attempting to invest without any knowledge of how to do so have the potential to set themselves up for grave financial mistakes in the future. In this way, it’s critical new investors take care before making any decisions or setting any investment goals.
But whether someone just wants to dabble in investing or they’re ready to make some more aggressive moves, they should first consider the advice of financial and investment experts. As such, the leaders of Kiplinger Advisor Collective have some sage advice for newbie investors. Below, they each offer one tip that individuals new to investing may not know or understand about how to do it smartly, and why they would so strongly advise taking these cautionary steps before taking any major financial ones.
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Do your research first
“I would advise newbies to do thorough research before investing. This is a no-brainer; yet, I’ve seen situations where eager investors make quick investing decisions just because it’s trending or it’s something they heard about from a friend or colleague. While these investments can occasionally see returns, it’s much more financially sound to just be patient and do adequate research beforehand.” — Justin Donald, Lifestyle Investor
Develop a sensitivity to fees
“Develop a sensitivity to fees — which I call ‘the only four-letter f-word of the investing world that counts’ — and avoid them wherever possible. Fees can have a significant impact on the time it takes to reach your financial goals and the amount of money you have available once you get there. Unfortunately, these fees are often hidden in plain sight. Similar to how you look at a nutrition label on food items, you need to look beyond the price tag of a fund and read the fine print. This will help you determine the expense ratio and any additional fees that may be charged by your broker or bank. It's an extra step, but it's worth it.” — Kiersten Saunders, rich & REGULAR
Learn about different risk/reward profiles
“Learn about the different risk/reward profiles of different asset classes. Investments in stocks, bonds, CDs, startup businesses, real estate and more have very different profiles on returns, how much risk there is and the time horizon. If you are a renter, consider homeownership as an investment. If you’re a homeowner, consider investing in rental or vacation properties for income and asset appreciation.” — John Bodrozic, HomeZada
Kiplinger Advisor Collective is the premier criteria-based professional organization for personal finance advisors, managers, and executives. Learn more >
Avoid acting like a trader
“Most individuals invest for long-term savings, so don't pay attention to stock tips that are meant for active traders. Put your money into low-cost index funds that'll balance risk with rewards, and make steady contributions for the long run. Don't jump on investing trends unless you have excess money to gamble.” — Dana Miranda, Healthy Rich
Understand the benefit of dollar cost averaging
“I think it’s important for individuals new to investing to understand the benefit of dollar cost averaging. It’s not about market timing, but rather the time you are in the market. Investing a consistent amount regularly can mitigate the impact of short-term market volatility. While dollar cost averaging does not prevent losses, it can help reduce the emotional roller coaster.” — Marguerita Cheng, Blue Ocean Global Wealth
Seek out professional help
“I would advise new investors to hire a financial adviser. Doing this can help them ensure that they make the best investments, whether it’s for long-term or short-term investments. Even if they don’t need the adviser in the long term, it’s wise to at least start with one to learn the basics and make some initial investments until they are confident enough to make investing decisions on their own.” — Angela Ruth, Due
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Disclaimer
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
