Yesterday, I shared with you my passion for investment accounts and why it’s the only place I keep my savings.
I wasn’t always this brave. Like many of you, I used to be an investing chicken – scared of dipping my feet in the water for fear of getting them bitten off.
Like it or not, investing is part of a comprehensive financial system. It would be darn near impossible to reach the retirement numbers you’re looking for without the benefit of high compound interest. High, like 9%. Not the couple of bucks you get in the bank…
And retirement is not the only goal. College savings, general savings, estate planning – I hope you’re considering all of these.
I understand…recent stock market performance has you worried. We hear things like “if you invested in 1997, your return is actually negative…” It’s a valid concern, but it can be addressed – with the right portfolio allocation, dollar-cost averaging, low buying opportunities, and other means of curbing your risk.
If you’re remotely interested in investing, here are a few places to start/things to do, to get over the fear of going broke with investing:
Open a Brokerage Account
It might seem counter-intuitive to open an investment account when you’re scared of investing. It is. That’s exactly why you need to do it.
Getting over that first hump and actually having the ability to see and practice some of the principles you’ll learn is priceless.
Select from the many available discount brokerages, but choose one with great research tools, so that you can play to your heart’s desire. A low opening balance requirement doesn’t hurt either (some are $0).
Learn the Basics
Before you do anything else, learn the basics of investing. Remember, knowledge is power, and armed with the know-how of investing, you’ll be less likely to freak out and run when the rubber hits the road.
Learn about the various types of investment options (bonds, funds, stocks), the basics of portfolio theory and asset allocation, the principles of compound interest, how trading works, and how to read financial statements. But don’t stop there – the more you learn, the better equipped you’ll be to invest.
Here are a few resources to get you going:
- Investopedia – Beginners Tutorials
- Yahoo! Finance – Investing Education
- MSN Money – Investing Education Center
Play a Practice Round
No team goes up to bat without having practiced! Investing is not unique – you shouldn’t just decide to dump your money into the stock market one day without having tried it first.
Thankfully, there are a few tools you can use to play around with fake money until you have a good feel for how trading works.
Here are a few to check out:
Dip Your Feet In
Once you have a good understanding for what investing is and how it’s done, it’s time to fund your investment account and get things going.
Start small – $500 or $1,000 at first, and discover how your account functions and how to track capital gains and other nuances of investing.
Before long, you will be well on your way to a healthy relationship with investing!
Photo by Katrina Tuliao