Portfolio Diversification: Are Stocks Right For You?

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Whether you’ve got some money already set aside for stock investment or will soon be coming into some money, you need to understand the market first if you’d like to invest in stocks.

Whether it’s the how-to, when to, or the where to that you’re questioning, the following article will help you understand more about what you can do to retire happy, healthy, and wealthy.

How Much Money Do I Need?

Portfolio Diversification: Are Stocks Right For You

Truth be told, there’s no real minimum needed to start your investment account with an investment broker. It is far better to invest now and start small than to wait until you build a couple of thousand dollars, which may take some time depending on your financial situation.

While, as mentioned, there’s no real minimum, a reasonable $200-$1000 is the oft-quoted number, to begin with as an investment.

How Long Will I Need To Invest?

You should know that investments are made for the long-term. Whatever amount you’re investing, you should be prepared to lock that money away for at least several years – sometimes decades – before you can access it again.

Keep in mind that where you invest your money will determine the length of time you’ll be required to lock it away for.

How Do I Choose Where To Invest?

The good thing about investments is that it’s a wide-open playing field. You can invest your money wherever you want to. If you have a particular favorite company, you could invest in them. You could invest in an industry if you think they’re going to be particularly profitable in the future.

Pro-tip: do not invest your money in something that is insecure or flexible with value. For example, the oil and construction industries fluctuate in value ALL the time, as the price of oil goes up and down like a yo-yo.

Or, as the cost of materials for construction fluctuates. Pick an industry or company that is going to see large-scale profits in the future or an industry that is going to be incredibly necessary to humanity.

Where Do I Make My First Investment?

Investments can be made through online or in-person brokerage firms. Tech blogger Antoine Bechara says, “For those who are new to stock exchanges, stock brokerages, and just stock investments in general, it is a good idea to go with a professional brokerage firm and have a financial advisor guide you through the process and give you the best advice.”

Online brokerage firms have exploded in popularity in the last decade, largely due to their fire-and-forget model of stock investment. If you’re experienced at all with stock investment, an online broker might be a better choice for you, rather than those who need the extra assistance when first-time investing.

Another advantage of online brokerage firms and online investment is that it is typically cheaper for first-time investors. For example, fees for online brokerage firms can be as little as $10.00, while in-person investment advisors will usually advise their clients to invest a minimum of $500.00.

How To Build A Portfolio?

One of the most important things in the investment game is to build a portfolio. This is otherwise known as diversification. The basic principle is that you want to invest as much as you can in as many different industries or companies as you can. This will help to maximize the potential return on investment.

Diversification is a solution for new investors in order to lower their risk of losing everything because they put all of their proverbial eggs into one basket. Spreading your assets through numerous investments is the best way to ensure that if one investment doesn’t pan out, you won’t have lost everything.

Your portfolio doesn’t always have to be an investment in an industry or company, though. It can be other things like a second home, or an “investment property” – essentially a property that you buy cheaply and invest some money in to hopefully bring you many times return-on-investment in several years. This is particularly true of rental properties. Another simple enough investment is a savings account, they grow year-on-year and require very little to open.

Investments are all about making your own money work for you. And the end goal is to give you the happy, healthy, and wealthy retirement that you deserve.

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Author: Luke Fitzpatrick