New to Investing? 5 Proven Strategies to Grow Your Money Wisely

Diving into investing can feel scary at first. The good news is that there are plenty of resources to help get you started if you are new to investing. Here are five proven tips to assist you as you sharpen your investing skills and learn how to make the most out of your money.

Establish a Solid Foundation

It is important to establish a solid financial foundation before you begin your investing journey. The volatility of the markets necessitates that you feel comfortable with your financial footing before taking on more risk.

Start with building an emergency savings account to be able to lean on if life throws you a curveball. Most experts recommend keeping about three to six months of essential monthly expenses in your emergency account. This money could be used to keep you afloat in the event of a job loss.

It is also important to pay off high-interest debt before throwing extra money into the stock market. This means paying off all credit cards. Lastly, you will want to take advantage of any employer-sponsored matching programs for 401(k) or health savings accounts (HSA). Not leveraging these benefits is leaving money on the table.

Set Realistic Goals

Goal-setting is an integral part of establishing your investment portfolio. The best goals are the ones that come from what is personally important to you. For example, maybe your goal is to save for a home or a vacation. Or perhaps you want to get to a place where you can retire early? Putting your goals on paper and reviewing them regularly will help to keep you on track.

Once you have goals firmly established, you can determine your personal risk tolerance. Your risk tolerance should largely be dictated by how much time that you have until retirement. If you are starting early in life, you are likely able to take more risk in the markets than if you are counting on this money to be available in a few years. These two factors will serve as a guide as you come up with an investment strategy that you feel comfortable with.

Learn Basic Investing Terms

You are not alone if you feel overwhelmed when you first begin to dive into the investing world. Remember that you are not expected to be an expert. However, learning a few key terms will help you to get a better grasp on the industry so that you do not feel as intimidated.

Start with learning basic terminology. For example, understanding the key differences between mutual funds, stocks, and ETFs will provide a good foundation as you graduate to more complex topics such as portfolio diversification.

There are several ways to learn the investing basics, making it easy to find a method that works for your personal learning style. While some beginning investors prefer to read books or browse websites, others get more out of media such as podcasts. The more that you learn about these topics, the more empowered that you feel to make decisions about your financial future.

Start Small and Build Up

Do not let having just a small amount of money deter you from getting into the investing game. Many people mistakenly put off investing until they have a large amount of money to work with. Once you fully grasp the power of compound interest, you will be glad that you started investing as early as possible.

In addition to getting started on building that nest egg, starting small will also help you to establish better money habits that will last with you for a lifetime. The small amount that you start with will grow exponentially over time. Several online calculators can help you to visualize how it does not take a lot of money to begin to grow your wealth as long as you are consistent.

Look to Professional Help

Remember that the professionals are there for a reason. Do not hesitate to ask for help when you feel out of your comfort zone. A trained financial professional can help you to better define your goals, understand the markets, and identify how to use your money to work for you. A good adviser will look to update and rebalance your portfolio at least once per year. This annual update will ensure that your goals are being met as market conditions change.

Be sure to interview a few advisors or investing groups before making your decision. Not only do you need to find a service that will work for your goals, but it is also important to choose an advisor that you feel comfortable discussing deeply personal matters. Trust is key.

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