As we start the new year, it’s the perfect time to think about resolutions. According to USA.gov, popular resolutions usually include saving money, losing weight, or finding a better job. One more that might be worth adding to your list is starting to invest.
Having worked as a stockbroker, I’ve noticed that many people start investing in January. While it might seem intimidating, especially if you’re new to the stock market, it doesn’t have to be. Here are some basic rules to help beginners get started with investing. If your New Year’s resolution is to start investing, these tips can guide you in the right direction.
YOU DON’T NEED A LOT OF MONEY TO INVEST
Many people think you need to have thousands of dollars to start investing in the stock market, but that’s not true. You can begin with a small amount of money. While “small” can mean different things to different people, you definitely don’t need to wait until you have a large sum. Lots of brokerages allow you to open an account with just $500 or even less.
So, don’t be discouraged if you don’t have much money to invest. Start by saving a little bit each month. By putting aside an extra $20-$50 each month, you can start investing in about six months with many online brokers. Remember, every bit counts, and your future self will thank you for starting, no matter how small the amount.
AUTOMATE YOUR INVESTMENTS
Important tasks often get delayed or forgotten because of our busy lives, and investing for your future can be one of those tasks. To ensure you keep up with your investments, automate them. If you find it hard to remember to make regular contributions, automating your deposits can help.
Many online brokers, like Motif Investing, let you set up automatic deposits at any frequency you choose. This makes the process easier and ensures you regularly contribute without having to think about it. If you have a 401(k), you can do the same by increasing the amount deducted from each paycheck or setting up automatic adjustments.
KEEP YOUR INVESTING STRATEGY SIMPLE
New investors can sometimes make things more complicated than they need to be by trying to beat the market with risky strategies. Instead, consider low-cost index funds. These funds typically follow market trends and are less complicated.
Most online brokerage accounts will show you a selection of highly-rated funds, and you can also find these with a quick internet search. If you’re investing through a 401(k), most plans offer low-cost funds. If yours doesn’t, talk to your Group Benefits department to see what options are available.
If you’re starting your investment journey this year, congratulations! By following these simple and effective tips, you’ll be on your way to building wealth that will benefit you for years to come.
John Schmoll, the founder of Frugal Rules, started this blog to help people achieve financial independence. An expert budget planner and investor, he shares his knowledge to help others avoid financial mistakes. With an MBA in Finance and experience as a licensed stockbroker, John has a wealth of experience in the financial services industry.