Taking your first steps into the world of investing looks simple on paper, but in the real world, it’s incredibly easy to put it off. Reasons may be many and seem valid at the time. You may have cold feet about venturing into the unknown, don’t want to take a risk, or lose money. Whether it’s procrastination or the fear factor, putting off the decision only delays and reduces the rewards you’ll reap in the future.
The following investment tips for beginners will help you overcome your fears and get you on the right track.
Look at your spending habits as an outsider would. If you spend money routinely on things you don’t really need, rethink them. The money you save on a daily basis will eventually increase to the point where you can afford to make an investment. But if you’re carrying high interest credit card debt, it’s best to reduce that debt before putting money into any kind of investment. It’s not likely you’ll find any investment that will give you a return anywhere close to the money credit card interest cost you monthly.
Growing your money takes time and won’t give you the tangible, instant satisfaction that treating yourself might. Spending money for “nothing” in the immediate term often poses a hurdle that first-time investors have to experience and master to move forward. Instead of seeing investments as a sacrifice, imagine how that money will grow and what it will do you for you in years to come.
Some things are unaffected by age and time, but not an investment portfolio. The later you get started or the higher your expectations are, the more you’ll have to invest. Creating wealth requires attention and patience. Play it for the long game instead of the scrimmages.
Avoiding some kinds of debt, like high interest credit cards is financially prudent, but sometimes, you can make other people’s money work in your favor. Businesses use lines of credit often to provide cash flow, stock market investors buy on the margin, and real estate investors routinely carry loans on their properties. Knowing when and how to use leverage successfully is part of learning the ropes.
It’s much more engaging to invest in something that interests you than putting money into something you don’t understand or care for. If you use a financial services consultant or money manager, learn where they put money. Knowing some specifics increases your sense of ownership and personal involvement in money management.
Sometimes it’s easier to get started by diversifying your portfolio with a mix of holdings and it spreads the risk, always a good thing. Real estate investments, like turnkey properties, give you a strong sense of tangible ownership and provide an income stream as they appreciate in value. They’re also one of the most advantageous ways to use leverage to build wealth, and professional property managers streamline the day-to-day involvement.
As your investments grow over time, thank yourself for taking control of your finances by indulging in something special. The scale of your reward depends on your situation, but researchers have found that people who treat themselves after seeing significant gains in their portfolios do better in the long term. They found that people who celebrate their gains are more motivated to continue the behaviors that make them successful in their ventures.
The biggest obstacle to taking control of your financial future often lies in the inertia of past spending habits and attitudes toward money. Once you make the decision to start saving and spending constructively, you’ll find the rewards far outweigh the risks.