Investing for Beginners
Important Note
While it is wise to seek advice from a qualified financial professional before making investment decisions, it is still a good idea to conduct your own independent research into investment strategies before moving forward. And keep in mind that risk tolerance is a personal factor. What is considered "high risk" for one person may be "medium risk" for another.
Getting Started
Look at the debts you have and prioritize and eliminate those with unfavorable terms. You can approach this in a couple of different ways, but both require you to list your debts and make minimum payments on all of them while having a prioritized focus on one. When that debt is paid off, you’ll target the next one until you have paid down all of them.
The good news is that you don't need much money to begin investing. But before you get started, make sure to consider the following:
1. What's your goal? Are you saving for retirement, a down payment on a house, your kid’s college, or something else?
2. What's your time frame? How long will it be before you need the money? This will influence your investment choices.
3. How much risk will you take? Some investments are riskier than others, but they also have the potential for higher returns.
Types of Investments
Low Risk
High-Yield Savings, Certificates, Micro-Investing
These kinds of investments will usually hold your money for shorter periods of time but will also typically offer lower returns. They’re generally easy and safe but earnings could be outpaced by inflation.
Learn more about Redstone’s high-yield savings and certificates.
Medium Risk
Mutual Funds, Exchange-Traded Funds, Dividend-Paying Stocks
These investment types offer a balance between growth and stability. Investments are typically made in businesses that are established with a history of consistent earnings. They’re good for people who will accept some risk for potential growth.
Learn more about what the difference is between these types of investments here.
High Risk
Cryptocurrency, Stocks of New Companies
They are typically highly volatile and are better suited for people with a long-time commitment and wanting high growth potential.
A high-risk investment offers the potential for high returns but can also carry a significant risk of loss.
Investing on Your Own Versus with a Professional
The decision of whether to manage your own investments or work with a professional depends on your individual circumstances, goals, and preferences. If you have the time, interest, and discipline to learn, going solo can be rewarding and cheaper. But if you’re busy, uncertain, or just want peace of mind, a professional might be worth the cost.
On Your Own
You don’t have to be a professional to be successful. However, managing your own investments requires time and effort to research and monitor your portfolio. Plus, you’ll need to do your homework to understand some fundamental principles and guidelines.
Pros
Savings – low to no fees with many self-service platforms
Control – you make the decisions when you want
Ease – online platforms and apps make investing accessible to anyone
Cons
Mistakes – you may make errors or decisions based on emotion
Limited Resources – certain tools are reserved only for professionals
Time Commitment – research and education can take more time
With a Professional
Working with a professional can be a game-changer, especially if your financial situation is complex or you want to grow and protect bigger amounts of money. Learn more about the different types of professional advisors here.
Pros
Expertise – they know the ins and outs
Time Savings – they do all the work, so you don’t have to
Strategy – plans are tailored to you
Cons
Fees – from paid percentages or commissions, it's less money for you
Less Control – you may feel out of the loop if you like to be hands on
Quality – not all pros are equal – consider their experience
A Note on Micro-Investing
Micro-investing is a way to get started with investments through online platforms or apps without needing a lot of money. It’s low risk, builds discipline, and allows you to start without overcommitting. You can put small amounts of money into investments and over time that adds up. Do your research first to find an app or online platform that you feel comfortable with. A simple internet search for “micro-investing apps” or “fractional share investing” will give you many results to choose from.
Helpful hints: Pay attention to user reviews and ratings to get a sense of the app's reliability and user-friendliness. Also, remember to look for any fees associated with using it.
Additional Resources
High-Yield Savings
A high-yield savings account is great for anyone who wants their money to earn more without taking on risk.
Wealth Management
Our Financial Advisors will work with you to create a strategy that fits your life and adapts to your goals.
The Basics of Personal Finance
Mastering your personal finances can be empowering, helping you build a secure future to live the life you want.