If you were to ask the average person what is necessary to build wealth on a significant level, it is likely that they would say you must invest. Basically, while very few people, relatively speaking, are wealthy, a significant portion of the population understands that in order to become wealthy through your own efforts, you must have the ability to leverage your money and efforts. In essence, you don’t want to be in situations in which you are trading your time for money, and you want to make sure that the money you make is leveraged in a way that it continues to earn money.
Now, while this sounds simple on the surface, most people are not able to get beyond this point in order to develop effective investment strategies that will work for them. Most people would like to start small and grow their investment portfolio, but they are not clear as to how. Most people are not even clear as to how much money they need to get started.
The Importance of Investment Strategies
Before listing some investment strategies that you can use to start off small and build an accumulative effect, it is important to understand why investment strategies are so important. In order to be effective and successful in investing, you must be able to duplicate results on a consistent basis. Sadly, many people enter the investment arena, treating investments in the same manner they engage gambling — acting off of hunches, guesswork and the hope factor. These are not strategies, unless your goal is to fail.
Successful investors conduct their due diligence. They do their homework. Just like normal people, investors have different types of personalities. You have some who are immensely aggressive, with high tolerances for risk, and there are others who are reasonably risk averse. Based on personality, financial capacity and the relationship to risk, investors will find systems that have been proven over the years to be highly effective.
One strategy that is pretty much common among all sensible investors is diversification. The more diversified you are, the more insulated you will be to overall loss. So, finding investment strategies that works for you is essential to experiencing success in the investment world.
5 Investment Strategies for Starting Small
1. Hire a Financial Adviser
If you are not a seasoned investor, which you are obviously not, you do not want to begin your investment career on your own. It will almost be guaranteed to end tragically. Hiring a reputable financial adviser will expose you to knowledge, experience and advice, that will help you develop and hone your investment skills. Additionally, Financial advisers will generally have access to financial products that are extremely low risk — while producing a steady return. Please understand, low risk and high return on investment are not generally synonymous. As a general rule, the greater the risk the higher the ROI.
Remember, your goal is to simply get in the game with as little to lose as possible, with the idea of accumulating the capacity to get bigger and stronger in the investment world. Hiring a Financial adviser is where you will need to start, and it is one of the best investment strategies you will have at your disposal as a beginner.
2. Getting Comfortable with Mutual Funds
As stated earlier, there is a learning curve associated with investing, and while you are learning, you will want to find investments that will protect your innocence. Buying mutual funds or ETFs through a direct mutual fund account or through an online broker, is a good way to place your money in a place where it will experience slow, but solid growth that is highly predictable. If you choose to use an online broker to purchase mutual funds, you should definitely conduct a reasonable amount of research to determine the reputability of the broker, because all brokers are not created equal.
3. Enroll in a Retirement Plan or 401 (K)
One of the most common concerns of people who would like to start investing is not having the available funds to do so. The truth is that there is almost always discretionary spending taking place in the home that is less than necessary. By enrolling in an employer-sponsored retirement plan, you can contribute amounts that are so small that you will likely not miss them. Additionally, there are many of these programs in which the employer will match your contributions as a part of your compensation plan. So you can literally double your money right out of the gate by having your employer match your contribution.
4. Hire an Investment Broker
Now, if you want to start small, but you are looking to see more immediate and substantial results, you may consider hiring an investment broker. Yes, there will be a broker fee charged. Some brokers charge per investment, while others charge bulk rates per month. Make sure to find a broker that has the capacity to identify and work with your particular investment personality, because your investment personality will determine your investment style. Make sure they understand your perspective on risk.
When you hire an investment broker, make sure that you always keep in mind that you are the boss, and you are always in a position to say no. Some brokers can be very aggressive and pushy when they have their eyes on a particular investment that they really believe will perform well. In many cases, they will be right, but you are the investor, and you must learn to read how you see each investment opportunity. When you are not comfortable with an investment, take the time to figure out why. If the reason is legitimate, make it a part of your personal investment strategy. If the reason is not legitimate, train yourself to ignore it — it is just fear speaking.
There is no one-size-fits-all investment strategy for beginners who desire to start small. There are some key principles, such as don’t attempt to do it on your own, never invest what you cannot afford to lose, never use the “guess” method for choosing investments and always diversify. By following the simple steps listed here, you will expose yourself to opportunities that will help you grow at a pace you will be comfortable with.
Images from depositphotos.com.