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Making your first Investment

Discussion in 'What is Investing? (START HERE)' started by InvestOpen, Jul 4, 2018.

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  1. InvestOpen

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    Making Your First Investment

    Chances are you have probably already invested in something throughout your lifetime without even knowing it. Most people stop before they even get started simply because they don’t know how to get past the first few steps in preparation. Whether getting ready to make the first large investment, set up a retirement plan, or deciding to start your own business, there are a few key factors that can set you up for success.

    Setting Your Goals: If you don’t know where you’re going then it’s really hard to plan to get there. Knowing what you want out of your investment means coming up with actual numbers and times. The trick is having multiple plans, knowing where your decision points will be, and how to handle them.
    • Scenario Planning: Creating multiple scenarios allows investors to understand the range of possible outcomes given different inputs. Let’s say you’re trying to determine how much you need to save for retirement, but you aren’t sure whether you are going to retire at 55 or 65. Furthermore, you don’t know whether you’ll need $75,000 a month or $100,000 a month to live on for the 30 years afterwards. Most people can’t change how much they have to start investing with. Looking at multiple scenarios may show you may not be able to retire at 55, or that doing so would require significant cutbacks in your lifestyle.
    • Be Realistic: While it would be wonderful to get 30% return on investments each and every year, the likelihood isn’t very good. Planning for investing means understand what is likely to occur, not what one hopes to occur. Working with unrealistic expectations will more than likely leave you short of your goals.
    • Risk Tolerance: Risk and return go hand in hand. Generally, there is higher return with more risk. Understanding how much risk you are willing to take determines the maximum levels of return to expect from an investment. Further, knowing how much risk is acceptable at given points in your life can guide investment decisions.
    Decide How To Invest: Most people choose to invest only as a supplemental item to their overall income. Generally, this is done through a retirement account and the purchase of a primary residence. Whether you are risk adverse or not, investment products should suit your particular needs. Banking products, such as certificates of deposits and savings accounts, provide easy and secure options for conservative investors who don’t want to do much research, while online brokerages provide copious amounts of research for active investors.

    Do Lots of Research & Analysis: Opening a meatball sandwich shop in a town that is primarily populated by vegans may not be the best idea. While investing can be done flippantly, those who spend time preparing and researching usually fair better. Many successful investors spend time researching and developing their methods of analysis for investments before even making their first attempts. Even many stock traders spend months testing their methods before ever executing a trade. Research into an investment may not provide every piece of information required, but it will likely yield a better understanding of the value of the investment.

    Make sure you do full research on any investment and strategy you plan to take.

    < Types of Investments | Monitoring your Investment >
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    Last edited by a moderator: Aug 1, 2018
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