How to Invest for the First Time

For the fist time investors, learning how to invest can seem quite daunting. You have 15,000 U.S. companies that you can choose from, a lot of new terminology to learn, and just the sheer volume of brokerage options and investing strategies can make things complicated.

When learning how to invest for the first time, don’t make it out to be more complicated than it really is.

To be a successful investor, you actually don’t need to know anything about investing at all. It just requires patience and the discipline to invest regularly while avoiding the temptation to try to strike gold overnight. When you keep investing simple, you give yourself the greatest chance of losing the least while making the most. You can effectively make what is traditionally an investment with some degree of risk fairly risk free.

Here’s how. It has been proven time and time again that even professional investors cannot time or beat Wall Street. In fact, 75% of mutual funds trail the performance of the stock market. Knowing this, if you simply put your money in an index fund that tracks the stock market, such as the S&P 500, you accomplish a number of things:

  1. You instantly have a diversified portfolio that historically returns about a 10% annual return over time.
  2. You don’t have to actively manage your account, know anything about stock, or care about what is happening on a day-to-day basis.
  3. You keep your expenses and fees to an absolute minimum.
  4. You do not have to worry about how successful the fund manager is going to be at managing your money, because no matter what it will mirror how the market is performing.

Successful investing really can (and in many cases should) be this way. By keeping the process simple you will make money that will double over time, and continue to double as long as you stay invested. It’s when investors try to get creative or start to gamble that they lose their money. For every story of a person who got lucky and made a fortune, there are a million stories of people who lost it all.

Millionaire Money Habit: As you learn how to invest, realize that simple is usually better. History shows that you will make money by putting your money in something that replicates the S&P 500. What other investment with those kinds of returns can guarantee that you will make money?

2 Responses to How to Invest for the First Time

  1. Mrs. Micah says:

    I was quite intimidated by investing until I discovered (through PF blogs, not my PF class) the wonders of indexing. Now it doesn’t really intimidate me.

  2. i am hopping that with very hard work on Affiliate marketing, maybe i would be able to achieve Financial Freedom in 2 years time..':

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