It is no secret that the world of investing can be quite scary to people who have little to no experience when it comes to serious money matters, but that is no reason to avoid investing since investing is what turns money into wealth. It is extremely important that you learn as much as you can about investing before you start so that you make the best decisions possible with your money. A good saying to remember as you get started is, "Don't invest any money you can't afford to lose."
Before you contact a stock broker or open your own online trading account, you must have an understanding of the risk involved with investing. While it is a crude comparison to say that investing is like gambling, there is always the chance with any investment that it could go south, and you could end up losing your shirt. An investment is more like an educated gamble that you take significant time in researching before you act on. While there is no way to really research what numbers will hit on the roulette wheel next, there is a systematic way one can research stocks, bonds and mutual funds to try to figure out which investments will perform well and which ones won't. There are even people you can contact who will not only do all of this research for you, but they will also help you make some big financial decisions.
A stock broker is the best friend of every new investor. It is your broker's job to stay on top of all of the latest investment news and help steer you in the right direction when it comes to making big investment decisions. Your broker will take a complete look at your current financial picture and help you decide what investments to make to meet your short term and long term investment goals. While it has become fashionable lately to use sites like E*Trade that don't require a broker, those sites are only recommended for people who have an encyclopedic knowledge of investing and not for folks who are just getting started. If an inexperienced investor were to try to use one of those sites, it could end very badly since you would literally be gambling with your life savings. If you're new to the investment game, use a broker until you know the ropes.
Before you show up at your broker's front door with a smile and a check, there are a few major decisions you need to make before hand. First, you need to set some investing goals. Your broker will look at your current financial situation, your age and the reasons why you are investing to decide exactly what kind of investments are right for you. If you are in your 50's and you don't have much saved in the way of retirement, your investments will need to be somewhat risky since you will need to make a significant amount of money over a relatively short period of time so that you can retire at 60 or 65. On the other hand, if you are still in your 20's and the main reason you are investing is for retirement, your investment strategy can be conservative since you have decades to go until your final goal is reached.
Your broker will take all of this and more into consideration when you invest for the first time. You will also have a series of short term goals that you can plan out on the way to your long term goal, that way, you'll always know whether you are on the right track.
