At The Motley Fool, we often receive questions about what to invest in. While it would be easy to just jot down a list of things, there is no single answer to this question because everyone’s goals are different.
We’ve been helping people invest better for over 25 years, and we’ve learned valuable lessons along the way. So here are a few steps to help you figure out the right things to invest in.
Step 1: Give purpose to your investments
Are you saving for retirement? Socking away money for a down payment or your child’s education? If you have a target date for when you plan to cash in your investments, it is easier to decide which investment vehicles are best for you.
Step 2: Decide how much money to invest
You don’t need to be a millionaire to start investing -- you can start with $100. Of course, you’ll have more freedom of choice if you invest a larger sum, like $1,000 or $10,000, but you can certainly start smaller. In fact, if you are a beginning investor, it pays to be cautious.
No matter how much money you have to invest, always keep some cash on hand for emergencies, and never invest money that you will need in the next three to five years.
Step 3: Pick a major investment vehicle
Step 4: Let your age determine your investment risk
If you are a young adult within your first decade or two in the job market, you can afford to take chances on higher-risk, higher-reward investments like individual stocks. However, the closer you get to retirement, the more conservative you must be with your money.
Step 5: Create an investment portfolio of your own
After you've narrowed down the investment choices that suit your needs, you can create a diverse investment portfolio. The beauty of this effort is that you're free to make changes yourself -- for example, if you develop a stronger tolerance for risk, you can adjust your portfolio by adding some risky but fast-growing investments.
Want to get started?
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