Beginner’s Guide to Investing – How To Invest Your Money Wisely

Beginner's guide to investing
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As a brief beginner’s guide to investing, this section should hopefully help people who want to start investing learn a thing or two about the fundamentals behind this often complicated and eccentric process.

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At the same time, this area of your personal finances could be the most exciting and nail-biting of all of them. So strap yourself in and get ready for the bumpy ride!

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Beginner Investing – Keep The Training Wheels On!

financial advisor

If you are new to investing, it helps to enlist the help of a trusted financial advisor, someone who knows a thing or two about the different asset classes, their historic returns, their risk characteristics, and what constitutes a suitable investment.

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You have plenty of options for filling that “job” of a trusted advisor, especially given the wealth of information on the internet today – sites like Fool.com offer a broad view of various investments and financial advice.

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As well, investment companies offer simple solutions for beginner investing types.

Whether you choose an actual advisor to help pave the way to investment success or you tackle the job yourself through the many different resources out there, the point is simply that you need a professional on your side.

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Most often, that will limit you to mutual fund investments.

For those of us who are brand new to this process, an actively managed balanced fund like those offered by Vanguard probably makes the most sense.

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Once you establish a track record and gain confidence and knowledge, taking those training wheels off and placing greater investment control in your hands is understandable.

Whether that means investing in stocks and bonds on your own or managing an online trading account that holds ETF’s or a variety of appropriate mutual funds, that will be entirely up to you to decide once you reach that point.

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These days it’s also easier than ever for a beginner to start investing since there are so many resources available for all of us, from online courses to robo advisors, trading apps and sites, trading communities and help groups, etc.

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Start Investing Early – Enjoy Compounded Growth

start investing early

Common knowledge tells us to start investing early to enjoy the power of compounding.

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This was more true back in the 70′s and 80′s than it is today (back then, rates were a lot higher and unless you needed that interest income to survive, you could add it to the value of our investment and enjoy even more earned interest over the course of your investment life).

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Today, with rates at all-time lows, the power of compounding remains important, but you probably will not enjoy large enough rates through cash and fixed-income investments (see Asset Classes for more information on the different types of investments).

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However, the power of compounding, as an investment strategy or theory, still applies to growth-oriented investment vehicles like stocks and mutual funds where dividends and gains are reinvested.

So, start investing early, if you are able to do so. That may mean investing through a pre-authorized contribution to a mutual fund that will allow you to do so.

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Aligning those contributions with your paycheck is ideal as it most often will not cripple your personal budget.

You don’t even need a large budget, to begin with, heck you can start investing with $100 if you want.

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There are many investing apps that will help you save and invest money along the way, without you needing to do too much work.

Be Aware of Investing Scams

avoid investing scams

While investing can be a relatively easy thing to do these days, it’s important to keep in mind that there are still various scams out there that you need to avoid.

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Here are some of them:

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Penny Stocks

While investing in penny stocks is not really a scam in itself, the returns are usually so low that it’s not even worth risking your money in the first place.

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There are also a lot of pump-and-dump schemes that are performed by shady individuals and companies that can absolutely ruin a beginner investor’s journey.

MLMs

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We all know about MLMs by now right? Sure, some of these products and companies might be legit, but there is also an absolute ocean of MLMs out there that are complete scams.

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Low-value products and services that have an insane price mark-up are then being promoted by people that are eager to get rich quick to other people looking to do the same.

What they don’t realize though is that the only people getting rich, are the bosses and upper-tier fat cats of these schemes.

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Beginner’s Guide To Investing: Conclusion

The underlying message here is the following:

  1. Work with a professional (if you can)
  2. Start investing early and regularly
  3. Don’t fall for investing scams

These messages are fairly straightforward. So take a look at all our articles in the investing category (or our unofficial “Beginner’s Guide to Investing” section if you will) and learn about progressively more complicated strategies and concepts.

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