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3 Tips For a First Time Investor

So, you’re thinking about trying your hand at investing, but you don’t know where to start? No worries, even the most legendary investors had to start somewhere. But, before you become the next Warren Buffett, here are 3 tips for first time investors to get you started on your way.

Keep the Long Term in Mind

If you’re a first time investor, the first thing you need is a little patience. If you’re going to need your money in the next few years, a high-interest savings account is a great place to keep your money, but otherwise you should plan on a five to 10 year plan if you want to invest. You’re going to use this money to retire, to pay for your kids’ education, to make major purchases or other investments in the long run. Don’t think of investing as a way to get rich quick. Rather, think of the process as a careful, considered marathon with your money.

Determine Your Level of Risk

There are plenty of different places you can put your money, and each carries a different level of risk and potential reward. If you are more risk averse, you may consider something safer, like bonds. But, if you’re ready to take on the world, consider investing in some more volatile stocks. Of course, it’s always a good idea to diversify risk, especially if you have your eye on something a bit more uncertain. Just be aware that risk diversification doesn’t mean risk elimination, just as a higher risk doesn’t always mean a higher return.

Do Your Homework

Before you go giving your money away to just any old company, do a little homework so that you know when to buy low and when to sell high. There’s plenty to learn, and of course you’ll learn plenty as you go, just make sure you don’t jump head first into a bad investment. Get to know metrics such as book value, dividend yield, and price earnings ratio. You’ll thank yourself later for doing a little extra work upfront.

Conclusion

Investing can be a great way to make money, and it can be a lot of fun and very rewarding to boot. Just keep some perspective in mind, understand the risks of the market, and do a little homework upfront to ensure your money is doing the most it possibly can for you.

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