15 Tips for Beginners to Get Started Investing

If you want to build a secure financial future for yourself, you have to do more than simply save some of your money. You'll need to invest by buying income-producing assets so you can put your money to work.

Buying investments allows you to earn a return on your money that not just enables you to avoid losing ground due to inflation but also helps your nest egg to grow.

It can be daunting to get started, though. Fortunately, following these 15 steps makes it easy for beginners to make the leap into investing.

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Before you begin investing, make sure you've paid down your high-interest debt and ensure you have an emergency fund. These steps are important for two reasons.

Paying off your high-interest debt is almost assuredly going to provide a better return on your money than any investments that present a reasonable level of risk.

After all, if you have payday loans with an APR that could be upward of 400% or credit cards you're paying 17% or 18% interest on, you're going to be hard-pressed to find investments that would pay a higher rate.

There are different kinds of investment accounts.

You could choose a taxable brokerage account, which provides flexibility in when and how you deposit and withdraw money. But you'll need to be prepared for the tax consequences of investing in it, such as owing capital gains taxes if you sell investments at a profit.

Or you could opt for a tax-advantaged retirement account, such as a 401(k) or IRA. You get up-front tax breaks for contributing to these accounts and your money can grow tax free. But there are annual contribution limits and you could incur penalties if you withdraw money before 59 1/2.

To invest, you'll need to find a brokerage firm that allows you to buy stocks, bonds, or other types of assets.

There are many discount brokers that make that possible. The key is to find one that has the features you're looking for. Research different brokerage firms, paying attention to:

• The types of assets you can invest in;
• The minimum deposit requirement, if any;
• Margin requirements, if you want to trade on margin;
• Commissions (if any) charged for purchasing different kinds of assets; and
• The trading platform.

ALSO READ: Is It Ever a Good Idea to Invest on Margin?

Before you start putting money on the line, decide what your goals are for investing. Do you want to save enough for retirement? Is your goal to try to beat the stock market? Are you primarily interested in building a hands-off investment portfolio that exposes you to minimal risk?

The answers to these questions will shape the types of assets that you buy.

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When you invest, there's an inverse relationship between risk and reward. The more risk you're willing to take on, the greater the potential rewards will be -- but the greater the chance of big losses.

You'll need to decide how comfortable you are taking the chance of losing money. Your age and investing timeline will help you determine that.

The closer you are to needing your invested funds, the more risk averse you should be. And the younger you are -- and the more time you have to recover from losses -- the more risk you should be willing to take on.

ALSO READ: Risk Tolerance Was the First Thing I Reviewed With Clients for These 3 Reasons

There are many different kinds of investments you could put your money into, including:

• Stocks
• Bonds
• Mutual funds
• Exchange-traded funds (ETFs)
• Real estate
• Cryptocurrency
• Precious metals
• Currencies

For many people, having a mix of different asset types makes the most sense. However, while stocks, bonds, mutual funds, ETFs, and even real estate are generally considered more mainstream investments, assets such as cryptocurrency, currencies, and precious metals present greater risk.

You'll also have to decide how much money to invest. In general, it's a good idea to invest money if you won't need it for around two to five years.

If you'll need to access the funds before then, putting the cash into a high-yield savings account can be a better bet. Investing it on a short timeline increases your risk because you may not be able to wait out downturns.

You'll also have to make a decision about what percentage of your money should be invested in different kinds of assets. For example, you'll usually put some money into the stock market, but not your entire investment portfolio.

ALSO READ: 5 Things to Know About Asset Allocation

Some investing approaches, such as buying shares of individual stocks, take more time than others, such as using a robo-advisor or building a portfolio of exchange-traded funds.

If you enjoy researching investment options and are content to spend time monitoring your portfolio, then you'll take a different approach than if you can't be bothered to read earnings reports or don't have a clue about how to value stocks.

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There are lots of different investment strategies that you can choose. You could follow Warren Buffett's suggestion for the majority of investors and build your portfolio around index funds. Or you could embrace the value investing strategy and search out underappreciated stocks to buy.

The key is to research the different approaches out there and pick one (or more) that's a good match for your investing goals and interest level.

For most people, day trading or investing for the short term isn't going to be successful. If you want the best chance of building wealth, you should commit to buying assets you'll be content to hold for a long time. In fact, Warren Buffett famously advised not buying a stock that you wouldn't feel comfortable owning for at least 10 years' time.

You can't afford to confuse the price of an asset with its value. Depending on what you're investing in, there may be many different methods of determining what it's actually worth. For example, if you're buying stocks, you could use an asset-based valuation, employ a financial metric such as the price-to-earnings ratio, or perform a discounted cash-flow analysis.

Before you buy any investment, whether it's a bond or real estate, make sure you understand the different approaches to determine whether the price you're paying is worth it.

ALSO READ: How to Calculate the Intrinsic Value of a Stock

When you're investing, you never want to put all of your eggs into one basket. Instead, you should develop a plan for the mix of different assets you want to buy. If you're buying stocks, for example, you don't want to invest only in large U.S. companies. Instead, you might want a mix of small caps, mid caps, large caps, and emerging market stocks.

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It can be expensive to get started investing, especially if you're interested in buying stocks with a high per-share price. Fractional shares are a great way for beginning investors to get around this problem and start investing without having a fortune.

Fractional shares are available from many different brokers, and they simply allow you to buy partial shares of any stocks you're interested in. Since you don't need to buy full shares, you can spread your money around to more stocks and can buy companies you're interested in without being constrained by price.

ALSO READ: 3 Reasons Fractional Shares Are a Great Investment

Finally, you're ready to actually buy some investments. Transfer money to your brokerage firm and buy your first assets. Then, sit back and watch your money grow over time.

By taking the time to do your research and build a diversified portfolio of carefully considered assets, you can maximize the chances of investing successfully. Hopefully, you'll be amazed by how well your portfolio performs thanks to the hard work you've done up front.

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