Tips To Help New Investors Get Started

If you’ve just started investing, you’re bound to make a few mistakes as you find your footing. While there’s no guaranteed formula for success, there are ways to put yourself in the best position possible to start off strong and stick around for the long haul.

A post at MakeSpendSaveInvest dishes out advice geared toward young professionals looking to try their hands at working the market:

To avoid losing everything in a flash, it may be best to start off with relatively safe, conservative index funds until you develop a feel for the level of risk you’re comfortable taking on.

The post also recommends contributing to your account regularly, even when your balance decreases, to make sure you’re buying in at low prices. This doesn’t mean you should make sacrifices to fill out your investment portfolio. You should only invest funds you can afford to do without, scaling your contributions to your excess income as it fluctuates.

6 Simple Tips Rogue Can Use To Get Started With Investing [MakeSpendSaveInvest]

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  1. HowardRoarksTSquare says:

    1. Max out your 401k matching contributions at work (If they match up to 4% – put in 4%)
    2. After you’ve done step 1 max out your ROTH IRA contributions ($5k a year I believe)
    3. After you’ve done that – go back to step 1 and add what you want
    4. Never listen to a guy on the internet for financial advise

  2. Cat says:

    With what little money I have left for investing after paying my bills, I’m investing in canned goods, gasoline, and bullets.

  3. brinkman says:
    • Cat says:

      Buy index funds.

      I just summed up this book. Now you don’t need spend any money on it. Invest your $15.61 savings in the Cat Fund!

      Place $15.61 in a plain envelope, and send to:

      Cat Fund
      Behind the pipes
      Third washroom along
      Grand Central Terminal
      15 Vanderbilt Ave
      New York, NY 10017

  4. smartmuffin says:

    Uh, you’re supposed to get more conservative when you get older, not when you’re young.

    The key is “don’t invest any money you may need within the next 1-5-20 years (depending on your specific situation” So long as you follow that, younger people can more easily “afford” to take on higher risk than older folks who will need their money sooner. Index funds are definitely a good idea, as is dollar-cost averaging, but don’t be afraid of the stock market, ESPECIALLY when you’re young!

  5. SeattleSeven says:

    I dunno where the line between beginning and amateur is, but you very quickly need to bust out of this simpleton advice if you want to earn anything on your money.

    - Not all index funds are created equal, fees will eat your gains, index funds buy newly added stocks at very specific times – leading to loses for you.

    - Standing orders to buy shares is a great way to pay lots and lots in commission to your broker.

    - “Don’t invest anything you can’t afford to lose” is a stupid rule. There are lots of ways to protect your money, you should be learning about them and using them.

    • fortymegafonzies says:

      Aside from an FDIC insured savings account or CD paying incredibly low interest, how can one remove, to a substantial degree, risk of losing money?

      • SeattleSeven says:

        Options can get complication with crazy combinations of calls and puts on things you don’t own, but for simple insurance they are real easy.

        A Put is a contract that enables you to sell a specific stock at a specific price within a certain period of time.

        So let’s say you bought a share of YUM today for $65 and you can‚Äôt stand to lose a penny of it. You can buy a put on YUM at a $65 strike price for $1.80 through April 21. This guarantees you the right to sell that YUM share for $65 anytime between now and April 21st.

        Obviously $1.80 is quite a bit for insurance so if you can stomach a little bit of risk you could by a 4/21 put with a strike of $50 for eleven cents.

        There are many many other things you can do with options but covering yourself is one of the basic uses.

        • fortymegafonzies says:

          Yeah, but you can still lose a ton of money and the mitigation of loss potential comes with a mitigation of profit potential. So you can prevent catastrophic loss in the short-term, but I still think it’s wise advice not to play with money you can’t afford to lose. In your example, with the cheaper option, one can still lose about 25% of his money and that’s a very substantial risk. With the more expensive option, potential loss is limited to about 2.7%, but you also have to earn a 2.7% return (in two months!) on your investment just to break even — and you have to keep buying those options the whole time you own the stock if you want to keep your risk low, which is almost certainly going to eat your returns and then some.