Investing

Start a Portfolio

Investments are managed in a "portfolio," which is simply a collection of assets and cash intended to achieve some financial objective, like accumulating enough money for a home down-payment.

Defining an End Goal

Investing aimlessly in stocks with no clear goal will set you back over the long run, even if some of them do well in the interim. Forget others' get-rich stories and establish a timeline and scope that align to what's ahead in your life.

Factors to Consider

Cash Situation

If you're starting with a small amount of cash or don't have an income that can contribute regularly, consider a longer-term approach.

Risk Tolerance

Volatile price swings may bring you inherent discomfort. Or, you may have life commitments that can't absorb even moderate losses.

Liquidity

When do you need to turn your holdings back into cash? If it's soon, stick with heavily-traded securities.

Existing Debt

If you have the cash on-hand, it's usually best to first pay off existing debt before investing in new assets. 

Life Stage

If you have a demanding financial agenda, you may need to limit both your timeline and risk tolerance. 

A Few Examples

Grow Wealth

If you're long-term focused, you can consider riskier assets with high upsides that outweigh losses over time. 

Retirement

Employer benefits packages allow you to contribute a portion of your paycheck directly to a retirement fund.

Finance Future Event

Growing cash for a wedding or down-payment requires a liquid, less-risky portfolio as you near the event date. 

Building the Portfolio

Having defined your overarching investment goal(s) and associated risk tolerance, it's time to determine the right mix of assets that can achieve that desired return and how you'll obtain them.

Where to Begin

Allocate Your Cash

Rather than investing in a single asset, you'll want to manage risk by spreading your cash across assets, even if starting with just $500.

Pick a Broker

To be able to trade financial securities, you'll need a brokerage firm that can buy and sell assets on your behalf.

A Sample Mix

Funds - 70%

As a beginner, it's wise to allocate at least half of your cash to diversified funds that buoy returns during a rocky economy. 

Stocks - 25%

If you have the risk appetite, you can tap into stocks that, as a whole, tend to outperform other asset types over time.

Cash - 5%

A small set of cash is always a good buffer for your portfolio, which can be used for trade commissions or paying capital gains taxes.

TIP

Diversification is crucial, no matter the market

It's common for beginner investors to invest in consumer-focused companies that they know well. But, being too heavily exposed to a specific sector, such as technology, can amplify losses when the market has a downturn. Incorporating a variety of companies and assets in your portfolio puts necessary bounds on how much you'll lose or gain.

Common Brokerage Providers

Historically known to offer top-tier client service and other wealth management services.

Known as a leading provider of investment management services and retirement plans. 

One of the most recognized brands in online brokerage and stock trading.

Known for being mobile-first and the first to offer commission-free trading.

Do Personal Finance Yourself.

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