CNBC states that 52% of Americans aren’t investing, as of 2015. This means that people lost their window during the bull market. Stocks are soaring, and it’s harder now to find great stock deals than it was in 2009.
But that doesn’t mean that the market has run out of steam.
There’s still so much growth ahead. Warren Buffett made the bold prediction that the Dow will hit 1 million in the next 100 years. Whether this turns out to be true or not is yet to be seen, but one thing is for sure: the stock market is strong right now.
Investing for the long-term is a smart investment choice.
Before you start investing, you need to know:
1. What is Your Goal?
Your investment goals mean a lot. In fact, your investment goals will change as you age. When you’re younger, you might take higher risks. You can choose to invest in startups or choose to invest in solid stocks, such as Microsoft.
And then you also have to know your goals. What are you investing for?
- Down payment on a home?
Liquidity will dictate a lot of your choices. If you invest in bonds, for example, your investment will be tied up until the bond hits maturity.
If you want to make income from your investments, you may want to choose a stock that pays quarterly dividends. There’s a lot to consider, so fledge out your goals so that you know what type of investment is best for you to hit your goals.
2. Do You Want Hands-On or Hands-Off Investing?
You can be a hands-on or hands-off investor. You can choose to be a hands-on forex trader, or you can choose to invest in stock indexes. When you invest in an index, you’ll have your investment generate the same rate of return as the market index.
Index funds, such as the S&P 500 fund or the Vanguard 500, allow you to cut fees and make a substantial return.
Several expert investors recommend funds because they offer superior returns. You can also choose a hedge fund, but the fees will kill you in the end.
If you want to be completely hands off and take the worry of your own investment away, choose a hedge fund or index fund. Buffett recommends index funds if you’re a hands-off investor.
3. Risks, Portfolio Diversification
Investments are a risk. When you invest, the goal is to try and balance your risks as much as possible. Diversification is the key to balancing the risks of your portfolio. You can write a whole book on portfolio diversification, but a lot of investors choose to divide their portfolio among:
- Foreign stocks
And now you’ll also have digital currencies and precious metals mixed in, depending on the investor. If all of your money is invested in stocks, it’s a big risk. Markets can crash, causing you to have your investments cut in half.
If you don’t mind risks, you can make a lot of money in currency trading or commodities. The key is to determine your goals, how you want to invest your money and then to determine the risks you’re willing to take.
Your portfolio will then start to materialize based on these factors.