How To Invest???

The Rich with money are investors.

What makes them different?

Rather than simply spending every penny, investors use their money to acquire things that offer the potential for profitable returns, either through interest, income, or the appreciation of value.
As you approach managing money, you’ll learn to devote your limited resources to the things with the largest potential for returns. That may be paying down debt, going back to school, or fixing up a two-family house.

Of course, it may also mean buying stocks and bonds — either individually or as mutual funds or exchange-traded funds.

Thanks to technology, the investing world offers enormous possibilities to anybody with a few bucks and an internet connection. It’s our job to help you filter out the noise, learn the basics, and make good investment decisions from the start.

So here are the basics of how to invest—wisely.

Investing vs. gambling

Too often, people confuse investing for gambling. It’s not. If you take a look at the dictionary definitions, investing and gambling are quite different:

invest: “to put (money) to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income, or appreciation in value.” (via Dictionary.com)

gambling: “the activity or practice of playing at a game of chance for money or other stakes.” (via Dictionary.com)

So with investing, you’re making an educated decision to earn potential profits. With gambling, you’re playing a game of chance.

Look… all investing involves risk. But there’s a big difference between smart investing and gambling:

Buying a “hot stock” on a tip, without doing significant research, is gambling. Diligently setting aside money, putting it the best stocks or funds for your goals, and leaving it put for the long run… that’s investing.

If you love researching stocks and making fast trades in search of short-term profits, fine. It’s fun. I just don’t recommend doing it with more than 10 percent of your money.

That type of investing is for right now; I want to show you how to invest for the future.

How to invest for the first time (my advice)

Investing is like faith—people have some strong opinions and may even belong to one of many sects or schools of thought. Here are a few that come to mind:

The Common man – these people are convinced our financial system will collapse, so they stick all their money in gold and real estate.

The Gambling Day-Traders – these are most often the people you see in movies, with their desks or walls covered in monitors and TVs, watching every second of the day and seeing how the stock market changes.

The Long termers – these are people who simply invest in everything in order to take advantage of the slow and steady increase in the overall value of the markets.

If you already belong strongly to one of the above camps, you may not find the investing resources on InvestInn useful. If, however, you have an open mind and are interested in learning simple strategies for successful lifelong investing—without any gimmicks—then read on.

Our philosophy is to keep investing as simple as possible. Create broad diversification through a mix of low-cost mutual funds and ETFs, while keeping it fun by holding individual stocks with up to 10 percent of your assets.

To start investing, you’ll need to make a few choices:

Choose your platform

First, you’ll need to choose a platform with which to invest. Available platforms include:

Online stock brokers – these are brokers that are available online. You can typically do everything without ever having to speak to a person, which is nice for some people. Online brokers are also often much cheaper than a traditional brick and mortar broker where you’d meet face-to-face with a person.

A financial advisor – some people may choose to invest with a financial advisor because they want face-to-face interaction, professional advice, and don’t mind paying a premium for someone handling their money. Oftentimes, people with large sums of money to invest with hand it over to a financial advisor so they don’t have to do the work.

Direct mutual fund accounts – in order to avoid paying broker fees, you can actually buy mutual funds directly from the most mutual fund companies. Owning mutual funds is a smart investment decision in its own right, but avoiding additional fees is a wise money move as well.

Until you become a comfortable investor – we recommend buying mutual funds or ETFs, either through an online broker or direct mutual fund account. To make a more educated decision, make sure you check out the research we’ve done for you on the best (and most recommended) brokers.

Choose your investments

Finally, you’ll need to select your investments. This is where it gets overwhelming.

My advice is to stick with mutual funds or exchange-trade funds rather than individual stocks and bonds until you get your feet wet. These types of funds enable you to invest in a broad portfolio of stocks and bonds in one transaction rather than trading them all yourself.

They’re not only safer investments (because they’re diversified), but it’s often far less expensive to invest this way. You’ll either pay just one trading commission or nothing at all (in the event you buy a mutual fund directly from the fund company), as opposed to paying trading commissions to buy a dozen or more different stocks.

If you decide you want to venture out and buy individual stocks, we recommend you take a slow and steady approach. Don’t put more than 10 percent of your portfolio in individual stocks until you get very comfortable with what you’re doing.

A great place to start is by reading about value investing, where we focus on heavy amounts of research and a “buy-and-hold” mentality.

Some final advice

The most important factor in being a successful investor is not the stocks and funds you pick. Successful investing depends on:

Choosing proper asset allocation – the overall mix of bonds, stocks, and cash you hold in your portfolio.

Making and sticking with an automatic investment plan – this way you avoid making terrible, emotionally-charged decisions—like selling at the bottom of a market crash.

The investing information on InvestInn barely scratches the surface of all the knowledge out there about investing, but that’s OK. We’re not trying to train the next class of hedge fund generations so much as give the average person enough knowledge and confidence to begin investing on your own. I hope the investment strategies here are helpful.

Need A Financial Advisor?

The above investment accounts are all great for do-it-yourself investors. However, if you find yourself wondering if it’s time to get professional help making a financial plan, it may be time to work one-on-one with a financial advisor. You can learn more about how to find a qualified financial advisor to help with your investment goals in our blog.