Ten Tips for First-Time Investors

Okay, so you’re savvy enough to know that you can’t build your wealth simply by socking all your money into a savings account and watch­ing the entries on your statement grow. But you’re still wary about dealing with the ups and downs of stock market swings. You may be able to minimize risks—and control your stock market jitters — by adhering to a consistent, comprehen­sive investment plan. Here are 10 tips to help you get started.

Increase your Investment 10.

Without understanding how an investment works, you could be in for an unpleasant surprise. Take the time to understand your invest­ment options and the pros and cons of each. Read books, take a course, see a fi­nancial planner, or even consult with friends to increase your investment IQ.

Define your risk comfort level.

Typical­ly, the more volatile an investment is, the more profit you can make — but also the more loss you may incur. Safer invest­ments generally promise a specific — but more limited — return and don’t always keep pace with inflation. Deciding how much risk you are comfortable with will help you set and adhere to a smart invest­ment course of action — one ruled by sound strategy, not emotional response.

Match your Investments to your goals.

Define your short- and long-term invest­ment goals and identify how much money you’ll need to meet those goals. Then let those goals drive your strategy. For exam­ple, money you’ll need within five years may be invested in money-market funds, bank CDs, Treasury bills or mutual funds that buy top-rated bonds maturing in one to three years. Money you won’t need for five years or more can be invested in the growth market. In fact, the longer you have to invest, the safer and smarter the stock market becomes as an investment.

Don’t he guided by Investment “gurus.”

When considering where to put your money, look for funds that can withstand the test of time, and avoid managers who are “gurus” of the moment. Do your own homework. Review annual and quarterly shareholder reports, along with the most re­cent Form 10-K or Form 1OQ disclosure documents filed with the Securities and Ex­change Commission. You can obtain these documents by calling or writing to the cor­porate secretary or investor relations depart­ment at the companies that interest you.

Diversify.

Regardless of your personal risk profile, include a variety of assets that react differently to market conditions. Opt for a mix of stocks, bonds and cash invest­ments, so that when one sector of the mar­ket declines, gains in your other holdings can cushion the blow. In other words, don’t put all your eggs in one basket. Put your investing program on automatic pilot. Because there really is no such thing as “extra money,” you have to treat investing as part of your basic monthly expenses. The surest way to do this is if you don’t see the money at all before it goes from your wallet to your account. You can arrange for your employer or a mutual-fund company to transfer a fixed sum every month from your salary or checking account into an investment account.

Stick to your Investment plan.

If you want to achieve your financial goals, stick to your plan. Don’t let market swings or the desire to make a sudden big purchase cause you to make impulsive decisions and alter your plan. In fact, switching in and out of investments drives up transaction and tax costs. Also, you’re usually selling a falling investment and buying a rising one, so you’re selling low and buying high— a sure way to lose money.

Reinvest dividends whenever possible.

Rather than cashing dividend checks, rein­vest the proceeds. Many companies allow you to automatically invest your payouts in additional company stock. You’ll con­tinue to build your portfolio and you’ll save brokers’ fees and investment fees at the same time.

Track your Investments.

Make it a prac­tice to review your goals and investments once a year. In the event your circum­stances change, you also might want to revise your strategy. Check with your fi­nancial consultants. Make sure you period­ically meet with your CPA and other advis­ers to review your portfolio and allocations in light of changing goals, tax laws, invest­ment performance and various opportuni­ties that might arise. They also can advise you on how to time withdrawals and plan reallocations so you can make the most of your investment dollars.

Prepared by the Nevada Society of Certi­fied Public Accountants.