Investing in the stock market can be very lucrative, but investing is not without its pitfalls. We all know that the stock market has a high degree of volatility and is bound to economic pressures. If you are not careful, you could lose a lot of the money you invest in publicly traded companies.
With a little work, however, you can potentially reap the benefits of investing, grow your retirement or college savings accounts and add supplemental income to what you make at work while also aiding our national economy.
Here are some pointers for those of you looking to get started in investing.
1. Seek advice
Finding the right company, companies or funds to invest in can be a daunting task for beginners, so seek out the advice of a financial planner or investment specialist. Decide how much risk you want to take with your money. There are plenty of stocks that show sustained growth without massive swings in price, and there are others that are very volatile, offering the opportunity for higher reward or loss. There are advantages and disadvantages to each investing strategy, so it really depends on your comfort level as well as your current financial requirements. For example, if you’re nearing retirement, investing large portions of your savings in volatile stocks may not be advisable; however, for investors at a younger age with a comfortable amount of savings, this may be a more warranted risk.
2. Diversify your holdings
You should always diversify your stock holdings rather than investing too much money in either a few companies or a few industries. Investing in companies that represent a variety of sectors will help protect you from potential disaster should one area of the economy falter. A simple way to do this at the outset is to look into the purchase of index funds.
3. Start small
It’s best to start with a small amount of your savings until you become comfortable with the nature of investing. If you start small, you will have less to lose should the market falter. As you become more comfortable with investing, you may wish to risk more of your money, but you should always be sure to keep enough money available in the event of emergency.
The above guidance should not be implemented without consulting with an investment specialist to discuss your own investment needs and financial situation. Horizon Bank offers a full array of investing services if you are considering investing as a part of your financial future.