How do I start investing?

How do I start investing

When it comes to investing money, many people feel like they are in over their heads, and have no idea where to start. It can be intimidating to know where and how to invest your hard earned money. Educating yourself, and learning what investments are best for you and your individual situation, is one of the best things that you can do for you and your future. Do not feel intimidated when it comes to your money, empower yourself, and learn how best to invest your money.

There are many discount brokers that will provide you with an investment account. They are not salesman of particular investments. They simply provide the services to purchase the investments that you wish to invest your money in. Opening an account is easy. Simply go online, or into one of their offices, and fund an account. It can often be done with only a little bit of money. If you are unsure of which company to open an account with, ask your friends and family members who they use and trust. Also, if your employer uses a company for their retirement plan or 401K, that may be a good company, or starting point for you to consider opening an account with. That way, all of your money and investments, will be in one place, and easier to keep track of.

A broker is a person who makes stock trades for you. If you want to purchase a certain stock, you give a broker your order, they then go and execute that order, purchasing the stock for you. They then put those newly purchased shares into your brokerage account. You need a broker to be able to trade on the stock exchange. These days, a broker can either be an actual person that you know, or it can be on a computer, through your brokerage firm.

Investments are not FDIC insured. When starting to invest, you must understand that investments are inherently volatile. Unlike a bank account, that when left alone will ever so slowly go up in value, the stock market can swing wildly from day to day. It is often said, that the stock market goes up, on average, ten to twelve percent a year, but in fact, some years it will go up eighteen percent, and the next it may be down negative ten percent. It varies widely from year to year, and cannot be predicted. When talking about average return, it is over several years, not per year. The average will take into account the very high years, and the very low years, to come out with an average per year, over many years. Investing is best done long term, as to average out, instead of trying to deal with the daily ups and downs, that the market will bring. Risk and return often go hand in hand. If you want a higher level of return, you have to assume a higher level of risk. Investments can and will go up and down. Even bonds can and will fluctuate. No money should be put into investments, including bonds, which cannot be left there for at least 5 years or longer.

There are some investments that try and guarantee or help you from losing money. Any investments that guarantee your return, are going to be much smaller than investments that require some amount of risk. A better way to reduce risk, it is diversify your investments, and keep your money in several different areas and investments. That way, if one investment is not doing well, then the others may be faring better, because they are not in the same investment category or area.