Investing for Beginners: 5 Tips to Grow Your Wealth
If you want to build real wealth, it’s not enough to save. You need to invest consistently over time.
The problem for new investors is they don’t know where to begin. It can be overwhelming just thinking about it.
Not to worry. If you’re ready to start investing, use these 8 tips to embark on your investment journey to grow your wealth and create a more stable future for yourself.
1. Take Control of Your Finances First
Before you invest a dime, you should be financially stable and have a plan to consistently invest.
The best investment in your financial future is to save money and pay down debt first. When you have those things taken care of, then start investing.
Build up a cushion of savings before you invest. If you lock up your money in investments and an emergency arises, the last thing you want to do is sell off stocks to cover it.
Plus, if you have money saved and sitting on the sidelines, you can invest even more should a great opportunity present itself.
Understand your cash flow so you know how much is coming in and going out each month. When you work on your budget, set aside a certain amount each month to invest and be consistent.
Free Workshop – Join our free Simplify Money Workshop
The *only* way to save money is to spend less than you earn. That means you need to decrease your expenses or increase your income.
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Join our free 5-day Simplify Money Workshop, and start growing your wealth today.
Empower Makes Budgeting Easy
There’s a reason the Empower app is called “budgeting for people who hate budgeting!” — it makes budgeting easy for everyone, including those who dread it.
Empower includes budget suggestions, as well as fully customizable budgeting options and categories, such as major expenses, coffee, fashion, rideshare, and beauty. Best of all — Empower lets you set up spending limits in each category and will send you alerts when you’re close to going over budget.
Download the Empower app and customize your budget today.
2. Buy an Index Fund
Warren Buffet recommends investing in the S&P 500 index fund. Why? Because it’s very difficult to beat the gains of the broader market. Very few individuals can do it. Very few institutions can do it.
That’s why Buffett recommends NOT handing your money over to any firm who charges fees to invest your money in individual stocks. He says it’s a scam.
He suggests you learn a little about the S&P 500, and then buy that. That’s all you need to do.
No trading. No researching companies. No guessing.
A good resource for index fund investing is Jack Bogle’s The Little Book of Common Sense Investing. He emphasizes the importance of low-cost index funds and having a long-term investment plan.
Listen to Investment Advice Audiobooks from Audible
If Jack Bogle’s book on investing intrigues you, you can download it from Audible and listen to it while you drive to work or chill out at home.
With Audible, you have all the books you could ever want to listen to on your devices (not on your shelf) at the click of a button.
3. Don’t Be Afraid to Invest in a Company You Love
If you want to dabble outside of an index fund, buy a company you love and support.
When you believe in a company’s mission, products, or services, it can provide you with a deeper understanding and conviction about its potential for success.
While it’s important to conduct thorough research and consider financial factors, investing in a company you love can bring an added level of passion and commitment to your investment journey.
Check out Peter Lynch’s book One Up On Wall Street: How To Use What You Already Know To Make Money In The Market.
4. Stay Disciplined and Avoid Emotional Decision-Making
We live in a 24/7 news-cycle world, which can cause investors – new and seasoned – to make emotional decisions that are detrimental to investment success.
Avoid being swayed by short-term market noise or following-the-herd mentality. Read the books we recommended, and stick to your investment plan. Avoid making impulsive decisions based on fear or greed.
5. Monitor and Review Your Investments
If you choose to buy individual stocks that you love, you need to monitor your investments. Investing in a company is not a set-it-and-forget-it approach. This is your money and your financial future we’re talking about here.
Make sure to regularly review the companies in which you invest. Listen to their quarterly conference calls. Review their financial statements. You want to invest long term, but you should be willing to re-evaluate your investment based on the performance of the company.
The best way to learn how to invest is … well … to invest!
Your Roadmap to Investing
- Follow the tips above.
- Make a plan to invest each month.
- Learn about buying the S&P 500.
- Learn about buying the companies you love.
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About the author Michelle Salater
Michelle Salater is a freelance finance writer with a passion for personal finance education. When she’s not in front of her computer, she’s reading biographies and exploring remote areas of the world. She also freelances for Wooster Media Group LLC.
