New to Investing? Here’s What You Need to Know
Understanding the basics of investing is an essential first step toward building a strong financial foundation, but many people don’t know where to get started. Here are five concepts that can be helpful for new investors to grasp:
1. If you are young, time is on your side
Building wealth through investing is not about getting rich quickly. Rather, it’s about taking advantage of what works best for your circumstances. If you have recently entered the workforce, your biggest advantage is time. Earnings generated in your portfolio, even if modest in the beginning, can compound over time. The more time you give your money to grow, the greater the potential for growth over the long haul.
2. Be prepared for market swings
Any variable investment you choose – such as stocks, bonds or real estate – is subject to fluctuation. History shows that markets move up and down over time. Be prepared to see your portfolio suffer losses at various points throughout your investing life. Historically, markets have recovered from negative periods (although in some circumstances, individual investments such as a specific stock can suffer losses and never recover). Try to maintain a long-term view with your investments by not reacting to day-to-day events.
3. Find your comfort level in the markets
Markets are unpredictable, so it’s important that you’re intentional about the level of risk you’re willing to accept. If you have a lower risk tolerance, you can choose investments that are less susceptible to fluctuations but be sure to consider the effects of inflation eating into your rate of return. On the other hand, if you have a higher risk tolerance and you can stomach watching your portfolio fluctuate more widely in value, you may want to pursue investments that offer potentially higher returns.
But remember, there are no guarantees. The key is to find a level of risk you can live with over the long-term and invest accordingly.
4. Spread your wealth through asset allocation
Asset allocation is the
process of spreading your investment dollars across several categories of investments. The mix of categories, or asset classes, you own is an important factor in your overall portfolio performance. In other words, how you divide your money between stocks, bonds, cash, cash alternatives, mutual funds, and other asset classes will determine the outcome, and hopefully return, you realize.
As you select your investments, consider dividing your money among asset classes that respond differently to market forces. This investment concept, called diversification, can help you minimize the effect of market swings. If your investments in one class are performing poorly, investments in another class may be performing better. Ideally, gains in one class can help offset losses in another, which can help minimize the overall impact of volatility on your portfolio.
5. Make your long-term financial security a priority
It can be challenging to focus on the long-term when you have other pressing financial obligations, such as paying off student loans or building an emergency fund. However, if you can allocate a small portion of your budget to your future goals, you may ease your financial burden down the road. Consider investing a percentage of each paycheck into a workplace retirement plan
or an individual retirement account (IRA). You’ll become accustomed to living within the rest of your paycheck while the amount you have earmarked for retirement is given time to grow. If your company offers a match on those savings, be sure to take advantage of it.
A successful investor maximizes gain and minimizes loss. Though there can be no guarantee that any investment strategy will be effective, and all investing involves risk, these basic principles can help you strategically build your nest egg over time.
Duane J Lusson, CFP, ChFC, CLU, MSFS, is a Private Wealth Advisor with Ameriprise Financial Services, Inc. in Ottumwa, Iowa. He specializes in fee-based financial planning and asset management strategies and has
been in practice for 30 years. To contact him, call 641-684-4200 or stop by his office at 527 W. Second in Ottumwa, Iowa.
Ameriprise Financial cannot guarantee future financial results Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.
Investment advisory products and services are made available through Ameriprise Financial Services, LLC, a registered investment adviser.
Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.
Ameriprise Financial Services, LLC. Member FINRA and SIPC. © 2023 Ameriprise Financial, Inc. All rights reserved. File #5805288
Sunday Afternoon
Sunday afternoons are usually reserved for checking the trail cameras. I like to keep track of the deer population and how well the bucks are growing their antlers. The trail cameras give us a day by day update on what’s happening around the farm. My wife and I enjoy the time riding around the farm together looking at nature.
This past Sunday was unusually cool and damp. It had rained overnight and the temperatures were in the low 70s. We were planning a long drive so we locked the dogs on the porch. They were both quite disappointed but Jag refuses to ride and is getting too old to run that far. Billy
would be happy to run any number of miles, but would also come home with enough stick tights to take us hours to remove. He could ride in the Ranger with us but refuses to. There are too many things to smell and squirrels to chase to stay in the Ranger. He will bail out with the slightest provocation and is off on a new adventure. We drove across the dam and up the hill where we started into the woods. My wife glanced off to her right and spotted a fresh growth of oyster mushrooms. I stopped the Ranger and picked enough to fill my hat, the only container we had with us. It would be enough for a couple of meals of mushrooms and leave plenty for them to re-seed themselves. Further down the hill, we spotted a young chicken of the woods mushroom and stopped to pick it.
Chicken of the woods can be a great meal by
itself. It has the taste and texture of chicken.
Our next stops were to check the cameras. Two cameras had just over 300 photos on them and of course most of the pictures were of does or does and fawns. There were several pictures of some really nice bucks. One buck has a large rack with three main beams. He would make a unique trophy if anyone is able to get him this fall. Being old and wise will make him a worthy adversary for a determined hunter.
After an extended trip around the timber, we headed back to the house. At the edge of the lawn, a large fairy ring of mushrooms was starting. A quick glance was enough to tell us, these are vomiter mushrooms. We left them where they were growing as eating them causes exactly as their name implies. That would not be a pleasant ending to an otherwise great day enjoying the outdoors.
