How to Start Investing When You Don’t Know What You’re Doing

Today we have a guest post for you about how to get started investing.

For many years people have used the quote, “There’s a first time for everything,” to justify their behavior anytime it is different or shocking but done for the first time.

However, the saying is actually quite true. No one does anything and starts in the middle, end, or anywhere else in between except at the beginning, or “for the first time.” The same can be said of investing. If you’ve been thinking about investing but you’re wondering how to start investing when you don’t know what you’re doing, read on.

 Get Your Finances in Order

Most financial advisors will tell you the first thing you should do is to pay off debt and build a cash reserve, before you even think about investing. Whether or not you should pay off all debt before you invest is up to you, but it may depend also on how much interest you are paying on your debt as well as compared to the amount of money you could potentially make by investing that same money. Once you have your finances in order and have built an emergency savings, it’s a good time to start investing.

Consider Simple Options

Does the idea of risking your money in an investment scare you? You are not alone. One of the reasons many people decide not to invest is because of the fear of losing their money. But there are investment choices that offer less risk just as there are others that promise a higher return but have more risk involved. Another major fear that stops people from investing is feeling like they don’t know what they are doing. But you shouldn’t let that stop you as there are some options out there to simplify the process.

• 401K: When you are just dipping your toe in the water for the first time, and are not self-employed, consider investing in an employer sponsored 401(k) plan. Many employers that offer this type of retirement plan will also match contributions into it up to a certain percentage. Don’t make the mistake of turning away free money. This may be the best return on your money that you’ll ever see.
• Stocks: There are many different brokerage firms out there to choose from. Your investment goals may help you narrow the list down and determine which firm you want to place your money in. You might also consider hiring a financial planner, or going with a robo-advisor to help you if you aren’t sure what steps to take. Financial planners and robo-advisors can help you choose investments that are neither too risky or too conservative for your age and liking.
• Target Date Funds: This might be a good place to start if you are unsure which investment option to choose. These funds are diversified automatically by fund managers who have pre-determined how to allocate those funds based on your age and the date when you want to retire and start using your invested money. Your investment is in a mixture of funds with some having more risk and others less so. As you near your retirement date the mixture changes transferring your money into investments with lower risk.

Monitor Your Investments

There are plenty of investment options out there depending on the amount of risk you are willing to take and what your goals are. No matter what you choose to invest in you will want to keep an eye on your money to ensure your investments continue to grow. Just remember not to watch your retirement investments too closely or you’ll start micro-managing them and potentially loose out on future earnings by pulling money out whenever there’s a loss in one of your funds.

If you don’t know what to do when it comes to investing, the best thing you can do is just get started with a simple option, like one of the ones listed above. The longer you put it off, the more future money you are losing out on.

Kayla is a personal finance blogger in her mid-20s who loves to write about money topics of all kinds.