1. Entrepreneurship
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Learn To Invest In 10 Steps
Learn To Invest In 10 Steps
Investing is actually pretty simple; you're basically putting your money to work for you so that you don't have to take
a second job, or work overtime hours to increase your earning potential. There are many different ways to make an
investment, such as stocks, bonds, mutual funds or real estate, and they don't always require a large sum of
money to start.
Step 1: Get Your Finances In Order
Jumping into investing without first examining your finances is like jumping into the deep end of the pool without
knowing how to swim. On top of the cost of living, payments to outstanding credit card balances and loans can eat
into the amount of money left to invest. Luckily, investing doesn't require a significant sum to start.
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2. Step 2: Learn The Basics
You don't need to be a financial expert to invest, but you do need to learn some basic terminology so that you are
better equipped to make informed decisions. Learn the differences between stocks, bonds, mutual funds and
certificates of deposit (CDs). You should also learn financial theories such as portfolio optimization, diversification
and market efficiency. Reading books written by successful investors such as Warren Buffett or reading through
the basic tutorials on Investopedia are great starting points.
Step 3: Set Goals
Once you have established your investing budget and have learned the basics, it's time to set your investing goal.
Even though all investors are trying to make money, each one comes from a diverse background and has different
needs. Safety of capital, income and capital appreciation are some factors to consider; what is best for you will
depend on your age, position in life and personal circumstances. A 35-year-old business executive and a 75-year-
old widow will have very different needs.
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3. Step 4: Determine Your Risk Tolerance
Would a significant drop in your overall investment value make you weak in the knees? Before deciding on which
investments are right for you, you need to know how much risk you are willing to assume. Do you love fast cars
and the thrill of a risk, or do you prefer reading in your hammock while enjoying the safety of your backyard? Your
risk tolerance will vary according to your age, income requirements and financial goals.
Step 5: Find Your Investing Style
Now that you know your risk tolerance and goals, what is your investing style? Many first-time investors will find
that their goals and risk tolerance will often not match up. For example, if you love fast cars but are looking for
safety of capital, you're better off taking a more conservative approach to investing. Conservative investors will
generally invest 70-75% of their money in low-risk, fixed-income securities such as Treasury bills, with 15-20%
dedicated to blue chip equities. On the other hand, very aggressive investors will generally invest 80-100% of their
money in equities.
For further information on this article and the
coaching programs available please contact:
Image Group International
Asia Pacific Head Office
Tel: (+61 3) 9820 4449
E: info@imagegroup.com.au
W: www.imagegroup.com.au
©2009

4. Step 6: Learn The Costs
It is equally important to learn the costs of investing, as certain costs can cut into your investment returns. As a
whole, passive investing strategies tend to have lower fees than active investing strategies such as trading stocks.
Stock brokers charge commissions. For investors starting out with a smaller investment, a discount broker is
probably a better choice because they charge a reduced commission. On the other hand, if you are purchasing
mutual funds, keep in mind that funds charge various management fees, which is the cost of operating the fund,
and some funds charge load fees.
Step 7: Find A Broker Or Advisor
The type of advisor that is right for you depends on the amount of time you are willing to spend on your
investments and your risk tolerance. Choosing a financial advisor is a big decision. Factors to consider include their
reputation and performance, what designations they hold, how much they plan on communicating with you and
what additional services they can offer.
For further information on this article and the
coaching programs available please contact:
Image Group International
Asia Pacific Head Office
Tel: (+61 3) 9820 4449
E: info@imagegroup.com.au
W: www.imagegroup.com.au
©2009

5. Step 8: Choose Investments
Now comes the fun part: choosing the investments that will become a part of your investment portfolio. If you have
a conservative investment style, your portfolio should consist mainly of low-risk, income-producing securities such
as federal bonds and money market funds. Key concepts here are asset allocation and diversification. In asset
allocation, you are balancing risk and reward by dividing your money between the three asset classes: equities,
fixed-income and cash. By diversifying among different asset classes, you avoid the issues associated with putting
all of your eggs in one basket.
Step 9: Keep Emotions At Bay
Don't let fear or greed limit your returns or inflate your losses. Expect short-term fluctuations in your overall portfolio
value. As a long-term investor, these short-term movements should not cause panic. Greed can lead an investor to
hold on to a position too long in the hope of an even higher price – even if it falls. Fear can cause an investor to sell
an investment too early, or prevent an investor from selling a loser. If your portfolio is keeping you awake at night, it
might be best to reconsider your risk tolerance and adopt a more conservative approach.
For further information on this article and the
coaching programs available please contact:
Image Group International
Asia Pacific Head Office
Tel: (+61 3) 9820 4449
E: info@imagegroup.com.au
W: www.imagegroup.com.au
©2009

6. Step 10: Review and Adjust
The final step in your investing journey is reviewing your portfolio. Once you've established an asset-allocation
strategy, you may find that your asset weightings have changed over the course of the year. Why? The market
value of the various securities within your portfolio has changed. This can be modified easily through rebalancing.
For further information on this article and the
coaching programs available please contact:
Image Group International
Asia Pacific Head Office
Tel: (+61 3) 9820 4449
E: info@imagegroup.com.au
W: www.imagegroup.com.au
©2009