Goal-Oriented Investing: 3 Tips for Market Newbies

Investing 101
Investing 101

It may feel unintuitive to jump into investing after one of the roughest weeks in recent stock market history, but online-investment startup GoalMine has experienced net inflows in the last few days, according to Chief Investment Officer Rimmy Malhotra.

"We didn't have one phone call over the last three days related to markets going down," he says, "and that tells me that we are positioning [GoalMine] in the right way."

San Francisco-based GoalMine, which launched nine months ago, is an online investing platform aimed at small investors who have very specific money goals, such as saving for tuition or a big event, like a wedding or vacation. With social-sharing tools, including the ability to receive or give a $25 donation over Facebook or buy an investment gift card, the site aims to help individuals raise investment funds through many different channels. Launched quietly last November, GoalMine hopes to capture a mid-income demographic that's underserved by bigger retail investors focused on six-digit clients.

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The site asks investors to envision specific goals and set targets, with monthly or weekly deposits, to get there. Based on an investor's time horizon, he or she is mapped into three possible funds: an FDIC savings account, for investors who need the money in less than two years; a bond fund, for mid-term investors with a two- to five-year horizon; and equity funds, for long-term investors with more than five years of time.

"Our whole product is premised on [the idea] that, regardless of income or financial literacy, you can invest," Malhotra says. "We will never ask you questions you don't know the answer to." GoalMine's fees amount to 1% of the portfolio, annualized.

Three Tips for New Investors

1. Step into the market slowly: "The worst thing that new investors can do is go all in at once," Malhotra says. "No matter what amount you have earmarked, step into the market. Don't go all in." He says to start with a portion of your earmarked funds. For example, if you want to invest $5,000 total, start with $1,000 as an initial investment, and then drizzle in the rest, putting in, say, $500 monthly untilo you reach your goal. The strategy helps smooth out market volatility.

2. Stick to your plan: Whether your goal is to grow $2,000 for a holiday vacation or $20,000 for a wedding in 2013, don't get sidetracked. Consistency is most important, Malhotra says. "You have to be invested to get returns."

3. Don't always trust your gut instincts: "Investing contradicts human emotions," Malhotra says."When the house is burning, you want to run -- and that is natural. But in investing, you need to do the opposite. When fear is paramount, run toward the fire. If it looks like paradise, that is when it is most dangerous." Market shocks are inevitable, but Malhotra points to historical data of the economy's resilience as compelling evidence for getting -- and staying -- invested.