By Avi Lele, co-founder and CEO of Stockpile
You’ve finally decided to take the plunge and invest in the market. Here are five important things you should consider when investing in the market for the very first time:
5 Things First-Time Investors Need to Know
1. Take the long view: Despite booms and busts, remember that over the last 100+ years, the stock market has historically performed better than bonds and real estate, and certainly better than cash sitting in a bank account. $1,000 invested in 1900 would have been worth close to $20 million in 1999! A 10+ year time horizon can help you keep perspective and weather the ups and downs of the market.
2. Invest at your comfort level: If you’re considering an investment in the stock market, make sure you’re only putting in an amount that you can afford to lose. Remember, that during one week in September 2008, the market plunged 18 percent and on Black Monday of 1987, the market fell more than 22 percent in a single day.
3. Diversify your investments: It’s tempting to put all your money in one investment, but diversification is an important principle in any portfolio you decide to build. Not sure which set of companies are right for you? Consider an investment in an index fund, such as the S&P 500. This allows an investor to have exposure to a wide variety of the largest stocks.
4. Actively follow your investments: Have you invested in individual companies? If you have, you should follow the news as well as the quarterly and annual reports of these companies, which are all available online. You can also listen in on the earnings calls of these companies and hear how management teams respond to some of the hard-hitting questions asked by professional investors. You’ll learn a lot in the process and it will help you hone your investment skills and help you in your future investment decisions.
5. Invest as consistently as you can: Nobody really knows what will happen in the future – it’s very hard to be successful by timing the markets. If you can set aside 10 percent regularly from your paycheck for investment, you’ll be way ahead of most people and that cushion will add up over time.
It has never been as easy and affordable to access the stock market as it is today. At Stockpile, we’re seeing many first-time investors join us since anyone can now buy any dollar amount of stock on our platform.
Stockpile lets people invest at any dollar amount (starting at $1) through fractional shares. This makes it easier to invest at a comfort level that’s right for you – a 10 percent loss on a $1 investment is just ten cents.
At Stockpile, we also provide access to indices through exchange traded funds (ETFs) and there are many to choose – from country specific ETFs such as a China or Brazil Index to commodity ETFs such as gold.
About the Author:
Avi Lele is the Co-Founder and CEO of Stockpile, a company whose mission is to make the stock market accessible to everyone in an easy and affordable way.