If you are new to the world of finance, investing money can be both exciting and overwhelming as a process. From bonds to mutual funds, stocks to real estate, there are seemingly endless options available. 

The whole point of investing your money is to grow your wealth overtime, but how do you know where to start? How do you know which is the best option for your money? Don’t panic, you’re not alone in this journey and while you don’t be the first to ask these questions, you won’t be the last either. 

We’ve put together some essential tips to guide you through the process of investing your cash, and by the end of it, you’ll feel more confident about making informed financial decisions.

Understand your investment options.

It’s so important that you familiarise yourself with the different types of investments available before you get into the world of investing. You might be wondering, are REITs good investments? Real estate investment trusts, for example, are a popular way to invest in real estate without the hassle of buying and managing the property directly, but whether they are a good fit for you really depends on your investment goals and your risk tolerance and even your strategy. You also want to learn more about stocks, bonds, and even exchange traded funds. Every option has its own set of risks and rewards so you have to have a broad understanding before you begin investing.

Start with a financial goal.

The best way to begin investing is by determining how much your financial goal is. Are you saving for retirement? Are you looking to squirrel away a down payment on a house? Are you looking to build an emergency fund? Having clear goals can help you to choose the right strategy for your situation, and when you know what you’re working towards, it becomes so much easier to align your investments with your timeline.

Assess your risk tolerance.

Investing is all about balancing risk and reward. Every investment has its own level of risk, and you have to discuss this with the financial advisor to understand how much risk you’re willing to take on. You don’t want to start pulling your money into different assets only to find that you’re losing more than you’re making. If the idea of losing your money makes you anxious, you may want to consider sticking to safer investments such as savings accounts or bonds. On the other hand, if you’re comfortable with a certain level of risk for the potential of higher returns, you might choose investments like real estate or stocks. The key is finding the balance that makes you most comfortable and that allows you to sleep at night.

Look to diversify.

There is a phrase that talks about not putting all of your eggs into one basket. This applies perfectly to investing, and diversifying your portfolio by spreading your investments across different asset classes helps you to mitigate your risk. Instead of investing early in stocks, think about investing in a mix of bonds and commodities. This way, if one area of the market performs really well, you have investments that won’t do badly. Diversification is one of the most effective strategies that you could have for reducing overall investment risk. Many investors would choose to use mutual funds which automatically provide diversification by investing in a range of bonds and stocks.

Consider investing for the long term.

Investing is not about making a quick profit. Even the word investment talks about long term profits and taking that long term approach to building your wealth gradually. If you want something to happen overnight, you may as well gamble on a lottery ticket because it’s not going to happen overnight when you are investing your cash elsewhere. Historically, the markets have shown consistent growth over long periods, so the earlier you start your investment journey the better.

Keep your costs as low as you can.

When it comes to investing your money, fees can very quickly eat into your profits. You should always be mindful about any commissions, management fees, or transaction fees that you could encounter along the way. There are certain types of investments, such as real estate, that come with additional costs like property taxes, maintenance and insurance. Make sure that you factor these costs into your strategy so that you have a true picture of your expected returns.

Be consistent.

Consistency is super important when it comes to investing your money. Even if you can only afford to invest a small amount every month, it’s those regular contributions that add up overtime. There are automatic investment plans out there and that can take the guesswork out of the investment journey. By setting up automatic transfers into investment accounts, you’ll be able to build your money steadily without having to think about it. This is a strategy that also helps you to take advantage of dollar cost averaging, which means that you can buy more shares when prices are low and fewer shares when prices are high. This helps to smooth out the effects of market volatility.

Continue to educate yourself.

The world of investing is always evolving so you need to evolve with it. Staying educated about new trends, products and strategies, reading books, attending webinars, and following financial blogs will help you to keep learning. The more informed you are, the better decision making you will make.

Don’t be emotional with your money decisions.

It is so easy to get caught up in the market swings. The market moves up and down all of the time, and you want to know that your money is growing and not pitching downwards. When you see headlines about the latest stock market crash, you might find that leads you to invest money elsewhere. Emotional decision making however can lead to poor investment choices. When it dips, it can be tempting to sell in a panic. Remember though, the market tends to recover overtime and this is a long term plan not an overnight one.

Continue to rebalance your portfolio.

The value of different assets in your portfolio will change. If your stock investments have performed really well, they may take up a larger portion of your portfolio than you intended in the first place. Rebalancing the portfolio can mean adjusting your investments to maintain the desired level of risk. Always set your schedule to review and re-balance your portfolio every few months, whether that’s once a year after you’re comfortable, or more regularly than that until you get used to it. Rebalancing ensures that your portfolio stays aligned with your risk tolerance and your goals.

Try to avoid timing the market. 

Timing the market is a very risky game especially if you’re new to the world of investing. Even the most experienced investors will struggle to predict the market movements, so instead of focusing on where to buy or sell, focus on creating a portfolio that is diverse and that aligns with your goals. The market has its ups and downs but you can stay steady among the curves.

Get some professional help.

If you’re feeling overwhelmed by everything we’ve talked about already, and you’re already overwhelmed by investment options and strategies, hire a financial advisor. Professionals will help you to build a customized investment plan based on your goals, your needs, and your risk tolerance. When you’re hiring an advisor, you will be paying out for that, but it’s worth the investment if it helps you to make better and more informed choices.