Investing Basics: How to Invest Your Money

Learning how to invest is a critical life lesson everyone needs to learn. You do not need to be an expert, but you should learn at least the basics. While it may seem very complex and you feel as though you don’t understand money well, but the first investment you make will probably be the hardest. 

The most common investments are stock and bonds, and depending on your risk tolerance will vary. Stocks represent partial ownership of a company and bonds are debt you are lending to a company. You can also invest in mutual funds which are groups of stocks or bonds or a combination of both. 

Another thing to consider is the time horizon of your investment. If you are thinking about investing for retirement, your time horizon may be a lot longer. If it is, you could invest in riskier investments such as stocks. In theory you could wait out the ups and downs, and overtime your investment should grow.

Diversification is also very important to investing basics. I am sure you have heard the saying to not put all of your eggs in one basket. The same lesson applies to investing. You should not pull all of your money into one stock or bond. I would recommend making multiple investments across a variety of stocks, bonds, or mutual funds. This will help you lower your risk and possibly enhance your return.

There are also so many easy to read books and articles out there where you can get a little better understanding of investing so you can begin making your first investments. Once you start, you might really enjoy it! I always recommend Benjamin Graham’s The Intelligent Investor. It is my favorite investor book.

Does anyone else have any tips on how to start investing your money?