Regardless of whether you are new to investing, or are fairly seasoned in the markets, you may be asking yourself some of the following questions:
- With all the information that is out there, what should I focus my time and energy on?
- What should my priority be if I’m just learning how to invest?
- What can I do to increase the likelihood that I will see gains instead of losses in my portfolio?
- And I’m sure many, many more…
Just like you, I’ve experienced my fair share of uncertainty when it comes to investing. Especially when you are just starting to invest, it is incredibly easy to become overwhelmed by the incredible amount of information, and how quickly that information changes (on a daily basis, really.)
So, I decided to ask some of the top online gurus the following question:
What should be the #1 priority for someone
who is starting to invest, and why?
Of course, answers varied based on personal experience and investing preferences, but there were a few common themes:
- Learn what you are doing. Regardless of whether you are working with an investment professional, or managing your own portfolio, it is absolutely critical that you understand what you are doing with your money and how the markets work.
- Determine where you are going. Set goals, and use your knowledge to plan your investment style around those objectives.
- Start NOW. Fully harnessing the power of compound interest will yield MUCH greater results than if you were to procrastinate until a later date.
Some of these bloggers have over 100,000 readers, and some less than that. However, they all offer great advice to help you become a more intelligent investor.
Here, in no particular order, is what these gurus had to say about getting your investing priorities straight:
J.D. Roth, Founder of GetRichSlowly.org
I think the #1 priority for somebody beginning to invest is to become educated. I don’t mean educated about the available stocks, but educated about how the market works and what methods provide proven long-term results. Start by reading about the methods and ideas that appeal to you, but don’t limit yourself to only those things. Also open yourself to new ideas. The better educated you are, the better you can make investment decisions that are appropriate for *your* life.
Caleb Wojcik, Founder of PocketChanged.com
Fees. One of the worst things you can do when you start investing is to be unaware of the fees that are slapped onto the different kinds of funds you are investing in. And I’m not talking about transaction fees (like buying or selling shares), I’m talking about annual recurring fees that will eat away at any gain you have. This is specifically why I invest my Roth IRA through Vanguard into their low-fee funds. Don’t become a victim of death by a thousand fees.
Carrie Smith, Founder of CarefulCents.com
The number one priority for anyone who’s starting to invest should be to determine their investing goal. Or rather the outcome they are looking to achieve. If you’re saving for retirement, your investing strategy will be much more conservative than if you’re trying to diversify your income or build a more complete portfolio. Pinpointing exactly where you’re headed and what you want to accomplish is the first thing all investors should think about.
Robert Farrington, Founder of TheCollegeInvestor.com
The number one priority for people who are starting to invest is to make sure that you fully understand what you’re getting into. This means doing a little bit of homework, and not just jumping in “because so-and-so said it would be a good investment” or “my financial adviser told me so”. You need to feel comfortable and understand, or else you won’t be successful, and you’ll wind up making a bunch of investing mistakes instead of making investing profits!
Andrew Schrage, Co-Owner of MoneyCrashers.com
The #1 priority for someone starting to invest is to think long-term. Day-trading and other short term, get-rich-quick schemes are for the experts only, and there are times when even they aren’t successful. Your investment portfolio should be created with the thought that it will provide you steady, solid growth over the long haul. The majority of the time, the goal of your investing efforts is to provide for a decent retirement, so take the time and make the effort to invest in products that have a track record of long-term results. This won’t guarantee any future success, but it’s generally recognized as one of the better strategies to take. One great area to get started in is mutual funds, which can offer a nice risk-reward balance.
David Ning, Founder of MoneyNing.com
The #1 priority for someone starting out is to learn, as soon as possible, that the biggest contributor to accumulating substantial wealth is through a high savings rate for the average joe. The good news is that this is entirely in control of the investor!
Larry Ludwig, Founder of InvestorJunkie.com
Asset allocation. Never put all your eggs in one basket. Without asset allocation you have no plan, or direction. Proper asset allocation takes into consideration some markets zig while others zag.
David Weliver, Founder of MoneyUnder30.com
I think a new investors’ top priority should be to read at least one book about the fundamentals of long-term investing. Some suggestions are ‘The Intelligent Investor’, ‘The Boglehead’s Guide To Investing’, or ‘The Little Book of Common Sense Investing’. You don’t have to become a expert, but you should understand the markets into which you’re putting your money and — most importantly — why putting it there is so important to your future.
Daniel Sparks, Founder of ValueFolio.com
My #1 priority for someone starting to invest in the stock market would be: Learn how to value a business. A good business does not make a great investment. A good, undervalued business makes a great investment. It’s impossible to know if a business is undervalued if you don’t know how to value a business.
Mike “The Financial Blogger” Founder of TheDividendGuyBlog.com
According to me, the #1 priority for someone who is starting to invest is definitely to start investing periodically as soon as you can. People underestimate the power of compound interest; the sooner you start investing, the bigger your nest egg will become. With a periodic investment, you also apply one of the most important personal finance rule: pay yourself first!
You can find more information about Mike at TheDividendGuyBlog.com or on Twitter.
*Note: I was not able to get a picture of Mike, but he’s got an awesome caricature on his Twitter profile – check it out!
Today marks the official launch of Compound Capitalist, and I am absolutely thrilled at the opportunity to share what I know with you. My goal is to help you become a more knowledgeable, confident investor. Over the coming weeks and months, we’ll be discussing and learning more about the fundamentals of investing, and I will be posting about a wide variety of investing topics. I would love to have you as a regular reader. Interested? Just fill out the form below with your name and e-mail to subscribe for future updates.
What do YOU feel is the #1 priority for someone who is just starting to invest? Why do you feel that way? I would love to hear your answers in the comments below!
A very special thanks to Jess Brianne for her help with the logo design and so much more. If you’re interested, you can find more information about her designs here.