Investing 101: Here’s what you need to know to get started, according to an expert

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If you’re like most people, you probably think investing is something only people with a lot of money can do. But here’s the truth: anyone can invest. Ready to have your mind blown even more? Everyone with some expendable monthly income should be investing. Yes, even if you aren’t making major bucks, and yes, even if you are still paying your student loans. Investing is a great long-term savings option that yields major rewards if you’re patient and smart about your investments.

Despite what you see in movies and on TV, you don’t need to be (or even have) a stockbroker to get in on investing. In fact, it’s easier than ever to go at it alone, thanks to platforms like Charles Schwab, E-Trade and Robinhood. These sites (and others) offer no or low fee options for individual investors to start building a portfolio. Even better, some also give you access to financial planners who can provide investing tips and help answer questions along your investment journey.

Ready to start investing, even just a little, each month? Read on below for six must-have investing tips from Brian Baker, investing reporter at Bankrate.com.

1. Think about your investing goals. First, Baker encourages people new to investing to ask themselves one simple question before getting started: How soon are you looking to see a return on your money? Or, how soon will you need the money you’ve invested?

If the answer is sooner rather than later, then Baker advises you skip investing in stocks and instead put your cash in a money market mutual fund or high yield savings account. No, these options won’t offer as big of a return as investing, but you’ll see steady increases over time. More importantly, all of your money will still be there if you need it in a hurry.

On the other hand, if you don’t anticipate needing the money any time soon, then investing is a good option. Successful investing often requires a long-term approach and patience because the market can fluctuate. Over time, however, it often yields positive results for many investors.

Another option? Do both. This isn’t an either-or situation. You can certainly put some of your expendable income in a money market mutual fund or high yield savings account and then use some for investing.

2. Consider how much you can afford to invest. If after you’ve paid all your bills and set aside some cash in a savings account, you still have money left over, great. You’re in the perfect position to start saving. While Baker says choosing how much to invest all depends on your personal expenses, he adds that investing 10% off your income is a great place to start if you’re able.

That last bit is important, though. Not everyone is able to invest 10%, and that’s okay. When you’re just starting out, invest only how much and when you’re able to. What you shouldn’t do is miss important bill payments or slack off on traditional savings just to put more toward your investments.

Another investing no-no? Prioritizing your investments over paying off your debts. This is especially true when you look at interest rates. While the money you invest may yield a 7-8% return, the interest rates on debt are often much higher than that. If that is the case with the debt you’re carrying, Baker advises prioritizing paying off your loans before putting lots of your money in the stock market.

3. Choose the right platform for you. Given the rise in popularity in investing, there are lots of different online brokerages and platforms for individual investors to choose from. Some of the most reputable and popular are Marcus Invest, SOFI, Acorns and Robinhood. Here are a few questions to ask when deciding which is best for you:

  • Are there account minimums? According to Baker, many of the online brokers available to individual investors who are new to investing don’t have any account minimums, so most people can easily get started with whatever amount of money they have saved.

  • What are the account fees? You’ll want to find out if there are any fees associated with having an account with the specific online broker you’re interested in. Additionally, find out if they charge you for making trades or new investments. Baker says platforms like Charles Schwab, E-Trade and Robinhood “all offer commission-free trading, which is great because you don’t end up paying a lot of fees.”

  • Do they offer fractional shares? Many of the brokerages are also now offering fractional shares, which Baker explains are great if you don’t have enough money to buy a full share of a popular stock like Amazon or Alphabet.

  • What investment research is available to you as a member? Chances are you’ll have questions as you begin investing. Some online brokers offer investment research to their members, which can be helpful when you’re just getting started.

  • What else do they offer? Some brokerages offer other services like tax planning or access to financial advisors. Others offer different types of accounts like retirement that might be of interest.

If you still need help deciding on the best online broker for you, check out Bankrate’s reviews of all the major players.

4. Start with a diversified spread. Rather than trying to buy shares from specific companies that are buzzy right now, Baker advises new investors begin their journey with a more diversified spread. Focusing too much on individual companies often means you’ll need to have an in-depth knowledge of that company and its long-term strategy or plans. Most novice investors don’t have access to that kind of information, nor the time required to acquire it, so Baker says it’s better to start by putting your money toward an S&P 500 Index Fund. “That’s going to give you a diversified portfolio of U.S. stocks at a very low cost, and that can be purchased through a mutual fund or through an exchange-traded fund (ETF),” Baker explains.

5. Know when to check in on your investments. If you’re following the more traditional investment strategy above, where you’re putting some savings into a diversified portfolio each month, you really don’t need to check your portfolio every day or even every week. Because this is a long-term strategy, checking monthly is more than sufficient.

“If you are taking more of a trading approach where you own shares of an individual company, you’re going to want to stay up to date on how those companies are performing, what their earnings results are, and you’ll need to keep a closer eye on those investments,” Baker says.

6. Steer clear of these common mistakes. When you’re finally ready to start investing, it can feel exciting, like you’re finally getting in on the action. But don’t get ahead of yourself, Baker warns. Here are three of the worst things you can do when you first start investing.

  • Don’t trade often. “Lots of trading activity is not the path to long-term investment success,” Baker says.

  • Don’t obsessively check your account. “If you’ve made long-term investments, there’s really no need to check your portfolio every day,” Baker reiterates.

  • Don’t get overly emotional. “Emotion is another enemy of investment success,” Baker says. “No one likes to see their portfolio decline, but stocks are inherently volatile, and it’s inevitable they will go down sometimes. People should keep their eye on their long-term goals,” he adds.

For more helpful investing tips, head over to Bankrate.com/investing.

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