Investment tips for beginners

Have you always wanted to get started in investing, or does it seem like something that's out of reach of only for the wealthy? The truth is that there are investments for nearly every income level. In fact, if you have a 401(k) through work, you might already be participating in investing although you may not think of it that way. The tips below can help you take another step into that world on your own.

Debt

Should you proceed if you have debt? Maybe, but it is necessary to take a closer look at what that debt is. If people waited until they were debt-free to invest, very little of it would take place. For example, many people who have investments are also paying off a mortgage. You might also be repaying private student loans you took out for college. Many people use private student loans to supplement what they receive in federal aid, and the interest rates for repayment are generally reasonable. When determining whether you should move forward despite your debt, take a look at the interest rate compared to the return on investment. If the interest rate is higher, focus on paying down your debt. The interest rates for credit cards can be as high or higher than 19%, so it is almost certainly better to pay those off first.

Take a Philosophical Approach

There's no better time than the present, and you have to let go of your expectations a little bit. In other words, there is no perfect time to get started, so you might as well do it now—provided you don't have outstanding high-interest debt. You should also prepare to lose money on paper in the first year. That doesn't mean it will necessarily happen, but there will certainly be years in which you lose, and it doesn't mean you have done something wrong. Just sit tight, and you'll most likely see a rise again. To borrow another cliché, this is not a sprint but a marathon.

Goals

Retirement is a long-term goal for many people, but what about short- and medium-term goals? Perhaps you want to take a vacation, renovate your home or just reach a certain savings amount. It's important to know what your goals are so you can assess how risky you can afford to be and how quickly you need your investments to pay off.

Choose Your First

With the above points in mind, you still haven't done the most important part, which is choosing your first investment. Where do you begin? Starting to buy stocks can be a little bit like plunging into the deep end of the pool. An index fund, which is inexpensive and offers a lot of opportunities for diversification, may be a good start. You could make it even easier on yourself by choosing a robo-adviser. They will help you build a portfolio based on your goals. A financial advisor can also be helpful, but if you know almost nothing about investing, ironically, it might also be difficult for you to evaluate their credentials. You may want to get recommendations for advisers from friends and family but experiment on your own a little bit first to get a feel for the market.