Congratulations! Maybe you have already made your first investment or are right on the verge of becoming a bona fide investor.
This means you have identified and overcome any fears you had about investing. As you begin targeting new investment opportunities, you are likely to encounter a few new experiences.
We have compiled a few ways for you and other new investors to build confidence as you move forward. You’ll notice that this list of loosely order steps slightly resembles a scientific method approach to investing.
You may have already moved beyond some of these steps, and you may need to revisit a few of them along the way. As the market moves and your investment style changes, you may want a quick refresher involving some of these steps.
What Do You Want to Know?
Confidence comes naturally with education and experience. As a new investor, you don’t know what you don’t know yet.
Since this is mostly a matter of personal preference, you can easily figure this part out on your own. Do you want to know the difference between a mutual fund and a retirement date fund?
Perhaps you are intrigued by alternative investment options like cryptocurrency and commodity trading. Or, maybe you have chosen some investments already and are looking for new options.
You might also be interested in exploring new avenues and researching different sectors or companies within those sectors. Information, trends, and players in the market change frequently, so education is an ongoing commitment.
There is virtually no end to the facets of investments, and you can easily explore several different components at the same time. It’s up to you to decide what you want to learn about first.
Find Appropriate Resources
Regardless of what you want to learn more about, chose your resources wisely. You may be seeking education out of interest or necessity, but where you get your information matters a great deal.
Investing is very similar to politics when it comes to matters of opinion. Some websites that offer investment guidance are severely polarized and limit the availability of accurate and relevant information.
Newspapers, periodicals, and textbooks are common resources for investment education. While they are relatively static and not interactive, they do provide useful and generally unbiased information.
The frequency of information you receive is entirely up to you. Some new investors like to track their investments throughout the day, while others feel overloaded if they check more often than once per day.
Technology puts information at your fingertips, even on-demand. Investors can set reminders or alarm notifications to alert them when new information becomes available.
This technology helps investors keep up with their investments in real-time and be among the first to gather new data about specific areas of interest.
Automatic investment tools such as recurring purchases and limit orders are made easy with smartphone apps and modern web pages.
Websites that represent a particular agency or investment firm may only provide information based on their best interest. Review these pages with a keen eye to ensure the information they provide is level data and not an advertisement for their services.
These educational techniques and tools keep investors organized and help build confidence that investments perform as expected even when you’re not micromanaging them.
People are another excellent resource for education and advice. New investors should be cautious of following tips supplied by someone they do not personally know and trust.
Investment styles vary significantly from one person to another, so the right path for one investor may not work for the next person. As a new investor, you want to ensure that your investment elections match your financial goals and investment personality.
Take a Quiz
One of the easiest ways to discover your dominant investment style is to take a fun quiz.
Actually, it’s probably a more enjoyable and accurate element of self-discovery to take multiple quizzes and compare the results.
Virtually every major investment house and the most popular investment apps offer quizzes geared toward new investors. The overall theme and number of questions will vary from one company to the next, so take your time and find the ones that most appeal to you.
Some quizzes will test your general knowledge and investment vocabulary, while others test your instincts. At first glance, these may seem too advanced for new investors, but let’s look a little deeper.
New investors can gain personal insight by taking and repeating these quizzes over periods of time. Confidence grows in new investors as they see their knowledge of investment terminology is consistently increasing.
This vote of confidence then inspires new investors to continue learning and trusting their instincts. Ultimately, quizzes are a great way to build self-trust in new and even inexperienced investors.
As investors build upon their existing knowledge and continually learn new techniques, they begin to form an individualized investment strategy.
Make a Plan
Here is where the tried and true scientific method style of research comes into play. Let’s look at how a new investor can develop a viable investment plan.
The first step is to organize data that you are sure about, and that will impact your investment strategy. This includes information gathered from your investment style quizzes, personal preferences, and your time horizon.
Ready to put these tools and resources to good use? It’s much simpler than you might imagine.
Your investment plan will consist of a few straightforward questions:
- When will you start investing?
- How much money will you invest?
- Where are these investment funds now?
- How many funds will you choose?
- Which investment platform will you use?
- What gauge will you use to monitor success?
Answering these simple questions will help new investors build the framework for their investment strategy. This easy to follow plan builds confidence because it takes the guesswork out of the investment process.
Deciding how much you want to and can afford to invest is typically the most crucial question for new investors. This is likely money that was considered disposable until an investment plan was put in place.
Are you using funds from discretionary income, an existing savings account, or from the household budget? Make sure that wherever your money comes from, it makes good financial sense and will not harm your other monthly financial goals.
If you’re considering a recurring investment, make sure that the investment platform you choose allows partial share investing. Otherwise, your funds could sit in a holding account until they reach enough to buy one share.
Some investment platforms charge a fee to place trades on your behalf. However, there are tons and tons of totally free investment services.
If you are paying for an investment service, be sure that the services they provide add enough value to be worthy of the additional charges.
Finally, how do you intend to gauge the success of your plan? This is an important tool in your investment plan because it helps you stay focused.
Is your primary goal to build a diversified portfolio? Are you aiming for a specific percentage in your average rate of return?
Whatever you decide for your overall goal, be sure you have a way to monitor your incremental successes. Seeing your progress builds progress and keeps you motivated throughout your investment journey.
Put Your Plan into Action
Now that you have successfully mapped out your detailed investment plan, it’s time for some action!
Record the details of your first investment. Whether you have decided to make a sizeable one-time investment or are committed to recurring investments, you want to capture the essence of your first deposit.
Investment firms and online platforms are required to provide electronic or hard copy statements that will capture many of the details for you. But, it’s good to have a personalized journal of your activity as you create your investment strategy.
Record the date of your initial investment and the details of the particular investment vehicle you chose. This may include the name of the stock, the purchase price, and the average lows and highs throughout the previous year.
Review the Outcome
How often you review your investment plan is your decision. You will likely get monthly, quarterly, and annual investment statements.
Compare your own records to the statement you receive from the financial institution to confirm accuracy. How have you fared?
If you set a target rate of return in your strategic plan, did you meet the goal? Were your goals to consistently invest a specific dollar amount per month?
When you study the impact of your first review period, are you proud of your accomplishments? See, your confidence is already growing!
Please do not be too concerned if you didn’t meet all of your goals in the first review period! This could be attributed to many factors, many of which could be entirely outside of your control.
Make adjustments only if you think they are necessary to your current time horizon and investment goals. Then, continue the cycle and see how you do on the next personal review period.
You have done great work so far! Keep it up!