Getting into Investing for the Future – 5 Basics

Investing can be intimidating. We understand. There’s a lot to know, even when your investment desires are simply to create a better future for yourself and your family. Maybe you’re interested in investing in stocks but haven’t got a clue where to start. Perhaps you don’t know what defines a mutual fund, money market or RRSP. Maybe real estate investing is your interest. Whatever it is, we can help you get figure out where to get started with five investing basics and if you enjoy the process and want to learn more, there are a number of programs to help take investment knowledge further, possibly even make a career out of it!

Now isn’t the time to talk about that career though. Instead, let’s focus on some introductory basics we like to think of as introductory market investment tips. The first tip – which is too important to go into a list – is to start saving and/or investing immediately. Your financial investments will make up the bulk of your future wealth and you want the freedom to do the things you want to do. So, knowing it’s time to start right away, let’s figure out where to take those first steps.

Five introductory investment tips:

1. Find someone with knowledge, experience and longevity.

The only way to learn is from someone who has done what you want to do – that means they’ve invested successfully and have a proven track record. You may have a friend who has had success in day trading for the last eight months or so. Would you trust your financial future with them? Probably not. Look for a mentor who is willing to share advice with you from market investment tips and investing basics to understanding the numerous terms in the investment world. It may be someone who has successfully invested on their own for years and created a healthy nest egg or it may be a professional who advises clients that you pay for a few hours of their time, or maybe it’s taking courses from experts who know the ins and outs.

2. Diversify.

The cliché, “don’t put your eggs all in one basket” became a cliché for good reason. No matter whether someone knows how to invest in stocks, mutual funds or other financial vehicles, things change. Often being long-term in investment focus evens out the bumps, but companies associated with your investments can go for a bad turn without a lot of warning. Consider Blackberry. They were a great investment in the “crackberry” years. Then a decline – not every investor would have anticipated this. Or perhaps think of the music industry – we haven’t stopped consuming music, but the financial model has changed dramatically over the years – not everyone would have expected the shifts in this industry. By investing in a few options, if one investment declines or drops off completely, it doesn’t wipe out all the work you’ve done up to that point.

3. Find a solid advisor willing to work with you, or do it on your own.

Either way, be prepared to invest time as well as money. If you want to know what’s happening with your investments you’re going to have to spend time learning more. Only those with complete and absolute trust in their financial advisor can turn a blind eye to what happens in the markets they are invested in. If you choose to work with an advisor who invests your money for you, at the very least, get to know the basics of money market investments, mutual funds, stocks and other vehicles and know the basic strategy you are comfortable with, then ask questions of your advisor. Make sure you meet with them more than once a year to review and ask more questions. If you choose to invest on your own, the level of time to learn about the process, the investments, the options, the fees, etc. is just that much greater. Education is key.

4. Trust the long-term process and don’t believe everything you hear.

Investing is a long-term concern. Losses one year don’t necessarily equate to losses over the long run. Day-trading is a highly volatile approach. Be prepared to keep investments in place for 10 years or more to ride out the valleys and capitalize on the peaks. On the flip side, with education you’ll also know if a change in a marketplace signals a time to get out of a certain sector. Just don’t be led too strongly by the often exaggerated headlines. Disaster, plummet and crash are words thrown around easily – know the numbers that lead to these statements and determine if things really are as bad as being reported.

5. Go with what you know, trust yourself and let go of the mistakes.

If you worked in the steel industry, you may have a good understanding of the trends and movement in the market. For those who spent time working in the telecom industry there may be a basic understanding of that industry and/or the retirement investments of the employees in the union. If your parents always invested in real estate, chances are you have more than a passing knowledge of how this can work to your benefit. Take advantage of the knowledge you already have and make the most of it when considering potential investments. That being said, be prepared for mistakes. Heck, even Warren Buffet makes investing mistakes. You likely will too unless you are very, very lucky. Let go of the mistakes and embrace the successes to keep moving forward.

Investing isn’t easy. It takes time as well as money to understand investing basics and make the most of your financial investments right from the start. Take your time to get to know your personal starting point and the options you can tolerate. You must educate yourself – either by speaking with others or through more formalized education – in order to do it yourself or to have a strong understanding of what’s happening when speaking with your investment advisor. There are no stupid questions in this arena – it’s your money and you need to make the most of it starting today.