At its most basic, investing means buying financial products for growth, income, or safety. You can choose: Stocks and mutual funds that invest in stocks Bonds and mutual funds that invest in bonds Cash and cash equivalent investments, including certificates of deposit (CDs) and US Treasury bills Your first step should be to identify a strategy to guide your investment decisions. Unless you’ve already got a lot of money or investments on hand from an inheritance or a trust fund, you’ll be building your investment portfolio from the ground up. So you’ve got time to learn as you go.
As a start, get a grasp of the basics. Begin with the financial articles in the magazines and newspapers you already read, or look for introductory information in the financial sections of portals and other websites. Talk to friends and family who are already investing.
When you’re ready to get serious, it might be a good idea to look for a financial mentor who can help you select specific investments—perhaps a friend or relative who is an experienced investor, or an investment professional. It can be a great way to get the encouragement you need to make important decisions. And as you expand your investment horizons, your mentor can help you create a strategy for putting together a more diversified portfolio.
You don’t need a lot of money to be an investor. But you will need enough cash to buy your first shares of stock or open your first mutual fund. It’s smart to set up an investment account so that you can contribute easily and keep track of your progress. A money market account with a brokerage firm or a mutual fund company is one way to go. So is a balanced or equity income mutual fund. If you’ve got the account earmarked for investing, you may be less tempted to spend the money on everyday expenses.
Contributions from the book It’s Your Financial Life in this press release are used with permission from Light Bulb Press.