How to Start Investing, and Why Now Is a Good Time to Do It
The problem is, learning how to invest well is a challenge. It takes time, research and a little daring. There's a lot of conflicting information out there. And events like the recent Chinese stock crash don't help matters. Many people are simply intimidated by investment, enough that they keep all of their money insulated from its peaks and valleys.
It's true that global markets are volatile. I was one of the millions of people who saw my IRA suddenly lose 10 percent of its value overnight this past month. But I also understand that this is all part of the plan. Long term investment strategy is built upon a foundation that is stronger than temporary market fluctuations. If new investors understand this, they can make a plan which will carry them for the long term. Here are some considerations to make when formulating your first investment strategy, as well as reasons why now is a great time to do so.
Invest Now, but Not Because the Market is Down
Somebody somewhere once said, "The best time to plant a tree was 20 years ago. The second best time is now." The same goes for investing. The stock market is inherently unpredictable. This has been proven by thinkers and analysts all around the world. People who try to get their money invested in anticipation of a sudden rise are gambling. I've heard it compared to trying to catch a falling knife: you might catch it unscathed, or you might really hurt yourself. One way to invest in a growing market as a whole, is through ETFs (cheaply priced shares of mutual funds). The best way to invest in mutual funds or ETFs is whenever you have money. The market will rise and fall, but it has a tendency to grow over time. Most new investors will need to adopt a strategy of slow, steady growth. If you've never invested, invest now. Once invested, stick to your plan.
Choose Funds That Take the Guesswork Out of Investing
There are some investors who are famous for getting rich by hand picking winning stocks. These people are either professionals or lucky -- probably both. For the most part, stock pickers fail to beat the market. That's why many mutual funds and ETFs are built on indexes. This means that each fund represents a tiny fraction of dozens of different companies that make up the best-performing segment of various markets. The owner of these funds benefits from the overall growth of the entire market, even if certain stocks fall by the wayside. You can easily buy your own funds from Vanguard or use a service like Betterment to do it for you for a small price.
Invest When You Have Money and Don't Listen to the Noise
To listen to stock market analysis, you'd think that the world was ending every time the markets take a dip. It's true that lots of people lose lots of money when this happens. But you also already know that this is going to happen. Consistent investment contributions to ETFs or mutual funds, using a tax protected account like an IRA, will tend to result in slow steady growth, making up the money they lose in temporary setbacks. Over time, the effects of compound interest will set in, and your investment will start to grow more and more quickly. But to achieve this, you've got to invest when you have money and you have to ignore the media bloviators who want to convince you to jump ship.
This investment strategy I've mapped out is a very conservative one. There are lots of ways to invest. But this one will work for many kinds of people. It's a plan that requires little upkeep, puts investors in the way of minimal risk, and has the potential to make individuals very wealthy within their lifetimes. So do what you need to do and get started today. The best time to start investing was years ago. The second best time to start investing is right now.