How do I Start Investing

When you want to invest money and have had some education of how to invest, the next step is to start investing. By this point, you should have studied up on different types of investments and have decided which investment is right for your financial goals. Different investments have different starting requirements.

How do I start Investing?

Set investment goals Before you start investing, you need to have established your financial goals, see investment goals. Set time horizon To make sure you work hard to achieve your goals, you need to set a deadline of when you need to achieve your goals by. See Time Horizon.

Open an investment account

Once you know what you wan to achieve and when to achieve it, you will need to open an investment account. TradeKing is one of the best and cheapest account, voted #1 by SmartMoney, the Wall Street Journal Magazine. You can chose between tax advantaged accounts or taxable accounts.

Determine your Risk Tolerance

Before investing, you need to decide how much risk you can take, see Risk Tolerance. What investment you buy relies heavily on how much risk you are comfortable taking on.

Who is going to manage your investment account?

When opening an investment account, sometimes you have the option of managing your own account or having a fund manager managed it for you. This type of account is called a managed account and if you have a good fund manager it can be a blessing, see Managed Accounts.

Diversification and Asset Allocation

Each portfolio should have diversification as well as asset allocation. Asset allocation and diversification reduces risk as well as smoothes income from investments.

What to invest in?

The next step is to decide what investments to invest in. Different investments have advantages as well as disadvantages. See What to invest in and stay away from market timing strategies.

From time to time, you would want to pull your money out of the market because the market may fluctuate too much. However, historical statistics show that if you do that then you are far more likely to lose money. If you stay invested, you will eventually come out ahead, that is if your time horizon is long enough to wait the market out. Overtime, you will need to readjust your investment portfolio by period rebalancing and reallocation. You cannot just let your investments sit in your portfolio untouched, especially if you are managing it yourself.