For those of you who have established consistent income, a budget to control spending, gotten debt under control, established at least an emergency savings fund that is easily available to you in case you need it, and have money available in addition to that… you may be ready to consider investing.
Now you find yourself asking a common question:
“How do I get started investing my money?”
1- Establish your personal goals.
Before you start investing you should spend time clearly defining (and writing down) the objectives you are trying to accomplish. Are you planning for college expenses for your children? a house? retirement?
Defining your goals and writing them down helps to clarify for yourself what you are trying to accomplish with any investment, and it will help you make reasonable choices in investing to accomplish your goals.
2- Decide if you prefer to work with a professional investment advisor or go it alone.
If you work with an advisor, remember that they have other motives besides just your best interest (e.g. getting paid) and not all look out for you the way they should. On the other hand, many of us are not prepared to invest effectively and wisely without a professional to help give us input and guidance. You are your own chief investment advisor. They provide helpful counsel, but you make the decisions. Consider verifying by researching online or meeting with more than one professional advisor separately and comparing notes.
With or without an advisor, you really need to do some homework to understand how to make good decisions.
3- Diversify your portfolio to manage risk and potential gain.
For example, let’s consider two cases:
Jack wants to invest and prepare for retirement. He is starting early and has time on his side. Jack wants to limit his risk exposure for his investment losing value and will be satisfied with a moderate return on investment.
Joe has a higher risk tolerance and is willing to consider more risk to achieve higher return on investment.
Diversify your portfolio consistent with your personal goals and personality. You need to be comfortable with your investment decisions. If you are nervous or lacking in confidence you may make poor decisions when unexpected events happen (e.g. 2008/09 stock market crash) and may make poor decisions. If you had a lot of your portfolio in U.S. stocks and then sold when the market bottomed instead of riding it out… you are really hurting.
4- Get Started.
Do not wait until you have perfect clarity on exactly what you will need to spend 20 years from now or more. Do not be discouraged from starting because you think you do not have enough to make it worthwhile. Even if you are starting small, you are going to gain knowledge and experience along the way.
Set aside some designated funds to start investing toward your objectives. Open an account at a reputable broker or financial institution. Begin the investing journey.
5- Steward your investments regularly.
Verify your portfolio is on track to deliver your objectives. Make adjustments as needed consistent with changes in your plans or the performance of the investments. Continue on a schedule of investing additional funds consistent with your long-term goals.
Do not be afraid to admit you made a mistake and get out of an investment, if warranted. Establish conditions ahead of time that would indicate when you should exit an investment if it does not go well. Our human tendency is to hold on to our bad investment decisions too long hoping for them to turn around.
If you are uncomfortable getting started, begin with a small investment that you are not afraid to lose. Invest wisely and you will soon see a return on investment that will encourage you and give you more confidence.
Remember, choosing not to invest is also a decision… and it may cost you a lot of lost opportunity to grow your money over time.
Bring your finances and investments before God and ask for wisdom and blessing. Seek Him in all you do, and He will make straight your path.
5Trust in the LORD with all your heart
And do not lean on your own understanding.
6In all your ways acknowledge Him,
And He will make your paths straight.
7Do not be wise in your own eyes;
Fear the LORD and turn away from evil.
8It will be healing to your body
And refreshment to your bones.
9Honor the LORD from your wealth
And from the first of all your produce;
10So your barns will be filled with plenty
And your vats will overflow with new wine.
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Remember that all you have belongs to God. Manage your money God’s way. Visit GrowGodsMoney.org .