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Step 11 of 12 to Financial Wellness – Start Investing

The world of investing can be confusing, especially for a first-timer. No worries, though; DoverPhila Federal Credit Union can help! Here’s how to invest in five easy steps.

 

Step 1: Define your tolerance for risk 
If you’re investing, be prepared for potential losses because there are no sure things. But how much loss can you take? Your risk tolerance will vary according to the time horizon you’re working with, the amount of money you can afford to lose, and your objectives.

Step 2: Define your investment goals
Why are you investing this money? Do you hope to save enough money for a down payment or to fund your retirement? Or are you simply looking for a way to grow your money? Identifying your investment goals will help you choose your investment vehicles and the amount of money you’re comfortable investing.

 

Step 3: Determine your investing style
Next, you’ll need to find an investing style that suits your personality and investing goals. Here are your basic choices:

  • Active management–managing your investments. This can be an excellent choice for investors confident in their market knowledge.
  • Broker/financial advisor–allowing an outsider to manage your investments and decide regarding your portfolio.
  • Robo-advisor–an automated option that typically costs less than a traditional broker and works with your goals, risk tolerance level and other personal details.

Step 4: Choose your investment account
You’re ready to choose your investments! Here are some popular first-time investments:

  • Bonds–a loan to a company or government entity that agrees to pay you back in a specified amount of years. You’ll get modest dividends until the bond matures. Bonds are low-risk but offer lower long-term returns.
  • Exchange-traded funds (ETFs)–individual investments bundled together and traded throughout the day, like a stock. Share prices are relatively low.
  • Mutual funds–professionally managed pools of investor funds that focus their investments in different markets. Mutual funds are inherently diversified, making them a good choice for beginner investors.
  • Stocks–a single or few shares in a specific company. Be sure to research chosen companies carefully.

 

Step 5: Learn to diversify and reduce risk
Monitor and adjust your portfolio regularly to keep it diversified and help minimize the risk of loss. Follow these steps to help you get started investing with more confidence.

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