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Investing 101: How to Start Investing

Updated: 6/26/2013 | Article ID: INF16194

You want a home of your own, an education for your kids, a comfortable retirement someday, and a little fun along the way. These are the dreams we all seem to be born with. To achieve them, we must become investors.

A brilliantly executed program of saving—putting your money into certificates of deposit, money market funds or savings bonds—can wind up costing you money. If a money fund is paying you 2.5 percent, taxes claim 25 percent of that, and inflation is running at 3 percent a year, well, you’re falling behind. To make any progress, you're going to have to do a lot better than that.

You should aim for an average return of 8 to 10 percent per year on your investments. You won't make it every year, but that's an achievable range if you plan your approach thoughtfully and stick to your plan.

Successful investors don't jump around from one place to another according to what's hot and what's not. They operate from a plan that's based on their goals, how long they have to achieve them, their tolerance for risk (both financial and psychological), and what they can afford to set aside for an investment program. You want to make money, of course, but you also want to be able to sleep at night. Here's how to do it.

Set goals and adopt a strategy.

Decide what you want to save for and how much you need to save, then figure out how you'll do it.

Make investing a habit.

Follow these easy steps to make investing part of your daily routine.

Control your risks.

Don't invest until you're ready, and don't buy anything you don't understand.

 
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