Investment Tips and Advice: A Beginner's Guide to Personal Investing

For many beginners, improving finances through investments can seem like a foreboding task. However, the rewards of buckling down and learning the basics of personal investing are well worth your time and, more importantly, your money.
 
 
The reality is that it only takes a few key pieces of knowledge to start investing wisely. Here are the questions every beginner should ask before investing his or her money:
  • What Are My Investment Goals?
    Before throwing your money into various investments, think about how you will eventually use this money. Are you saving for retirement? Do you need to send your kid to college?

    For most people, investment needs include a combination of several goals. Consider making a list of all goals that pertain to you and ranking them in order of importance. This will help you determine where you should put your money.
  • Do I Need to Diversify?
    The answer to this question is almost always yes. Putting all of your eggs into one basket is a risky maneuver that should be avoided at all costs.

    Most experts will tell you that smart investors minimize risk while maximizing gain. To help ensure you get the most for your money, spread your money out through a variety of sound investments.
  • How Much Risk Am I Comfortable With?
    Higher risk investments have the potential to deliver a huge payout, but they can also deliver catastrophic losses. Are you willing to accept a high amount of risk and can you afford to do so?

    Typically, riskier investments should be reserved for long-term needs. This will allow you to recover from any potential losses before you need access to your money.
  • What Are My Investment Options?
    When looking to invest your money, you have a number of choices of personal investing options. Most investment portfolios consist of several of the following popular funds (listed in order of risk from low to high):savings accounts, certificates of deposit (CDs), money market funds, 401k, Roth IRA, bonds, mutual funds and stocks.
  • Do I Need a Financial Adviser?
    Investing in a financial adviser is a smart move for many people, but expert help is not for everyone. If you are enthusiastic about investing and intend to take an active role in the process, then a financial adviser may not be necessary. In general, a financial adviser is beneficial when: major life changes have occurred (divorce, birth of child, job loss, etc.); you are not comfortable with investing on your own; you don't have time to manage your investments; or you have just come into a large amount of money (inheritance, home sale, etc.).

General Tips for Personal Investing

For most investors, it takes many years of smart planning and investing to ultimately reach their savings goals. To help you along the way, consider the following tips:
  • automate payments when possible
  • don't fall for get-rich-quick schemes (Remember that establishing wealth takes time.)
  • invest a regular amount on a regular basis
  • only invest if you are comfortable doing so
  • revisit your investments every few months and be willing to make changes
  • take full advantage of your company's 401k program by investing the full amount that the company will match.
Resources
 
Get Rich Slowly (2006). General Investment Tips. Retrieved February 12, 2008 from the Get Rich Slowly Web site.
 
Now You Know Media (n.d.). Do You Need a Financial Advisor? Retrieved February 12, 2008 from the Now You Know Media Web site.
 
Pennsylvania State University (n.d.). Investment Tips for Beginners. Retrieved February 12, 2008 from the Penn State Web site.