Individual stock investing is notoriously tumultuous, especially for first-time investors. The high-risk, high-reward nature, lack of diversification, and need for thorough research and market experience make it a no-guarantee venture. Although nothing in the market is guaranteed, mutual funds represent a safer option—in part because they’re more diversified. As a pool of stocks in several business and industries, the risk is mitigated by having potential losses in one area of your investment offset by gains in another. With mutual funds in mind, how should you start your investing career?

Let’s take a look at a few basic starting points.

1 – GET TO KNOW THE FUNDAMENTALS

If you’re unable to differentiate between a stock and a mutual fund, don’t fret. Even Warren Buffet couldn’t spell the word “market” at some point in his (early) life.

There are many free online resources to help you get acquainted with investing and the stock market overall. YouTube tutorials provide invaluable information for investors of all levels. Not to mention almost too many podcasts to choose from. And there are several free apps and software programs that let you play the stock market in real-time without using actual money.

Basically, if you have access to the internet, you have access to understanding the stock market, which is a crucial first step before investing your hard-earned money.

Financial news articles may discuss market minutiae that’s way over your head right now. Don’t let confusion discourage you. The advanced mechanics and esoteric lexicon of professional trading will seem less daunting in time.

Patiently trudging through the introductory material will eventually be worth it, even though it may not seem like it right now.

2 – WHAT’S YOUR BUDGET?

Investing takes discretionary income, and discretionary income takes discretion.

Everybody spends more than absolutely necessary at times. We suggest writing down everything you spend your money on for one entire week and then evaluating what can be cut from that list.

A business that doesn’t take regular inventory usually goes broke. Same goes for your budget. If you don’t know exactly what you’re working with—and exactly what you could be working with—then your chances of making the right investing choices drop significantly.

Most brokerage firms require a minimum investment, usually starting somewhere around $1,000. If you can set aside that amount, you’re off to a solid start.

3 – GOALS

Along with knowing how to invest, it’s equally important to know why. The type of investing goals you set will largely determine the type of investing strategy that you employ. Long-term investing goals usually require buy-and-hold strategies, which can involve mutual funds or exchange-traded funds (ETFs). These don’t typically produce high short-term yields, but they pay off in the long-run.

If you’re more of a gambler and are hungry to make money quickly, then investing in individual stocks may be the way to go. But take heed: you may very well end up quickly losing that money.

4 – YOUR RETIREMENT

They say it’s never too early to start thinking about retirement. That’s true. If you put it off for too long, it could very well be too late!

Employers normally offer some form of retirement plan and it’s worth checking if it’s possible to capitalize on it by investing safely in mutual funds.

5 – GET PROFESSIONAL ADVICE

Seeking the counsel of a financial advisor may cost you money initially. But that advice is an investment itself with the potential to yield major profits later on. Well worth the cost.

It’s best to get information from a variety of sources. Talking to a bank representative is a good start. Another is searching online for local financial advisors and deciding whom to speak with based on customer reviews. We recommend talking to at least a few people who can help you get started in mutual fund investing specifically. Then, compare notes. Though they may differ on a few points, the salient principles underlying mutual fund investment normally pop out clearly.

The more you learn, the less vulnerable you become. You’ll be better able to recognize safer avenues for investing, as well know when an offer sounds too-good-to-be-true (which mean it usually is).

Remember: fortunes are rarely made overnight. Neither is a basic grasp of the market. Take your time, or the market may take your money.

Featured Image: Depositphotos/© garagestock