Learn to Invest: Your Goals, Objectives and Investment Products.

Learning to invest can be daunting, but some of the decisions you make in your day-to-day life can help you navigate the unfamiliar territory. 

Are you learning the basics of investing? Do you find it a daunting task to navigate through this unfamiliar territory? If so, it might help to think of investing as shopping for a handbag.

Wait, what?!

What does shopping for a handbag have to do with the complex world of financial investments? A seemingly simple task, but buying a favorite luxury handbag requires a lot of self-awareness and decision-making skills. Smart shoppers don’t just take impulsive actions; instead, they try to find the product that best fits their personality, budget, and needs. The same principles apply when learning how to invest.

How can we apply these shopping instincts to your investment strategy?

Begin by Setting Goals and Objectives

When you decide to purchase a handbag, you might already have an intended purpose in mind. Is this handbag for special occasions, your daily commute, or business trips? Are you looking for a collectible piece that might appreciate with time? Perhaps you want the latest trendy bag as part of your collection. As an investor, your general goal is to grow your money. But there are many different methods to achieve this goal, and each method consists of different steps. Therefore, it’s very important to know the method by which you will achieve your goal.  

For instance, it might help you to decide the means—instruments and strategies—by which you seek to grow your money.

Are you interested in purchasing assets that might appreciate in value, such as stocks? You might also be interested in pursuing both growth and income via dividend stocks. Are you looking to invest for the short term or long term? Achieving returns across different time horizons may require the use of different instruments and strategies, all of which come with varying levels of risk.

Gauge Your Tolerance for Risk

Smart shoppers usually have a clear sense of how much risk they want to take when selecting a handbag. Will they pick the conservative, classic style that is likely to remain fashionable for a long time, or go with the trendy but provocative style and risk it becoming unfashionable much sooner? Risk tolerance in investing is like personal style; it varies across individuals. Some of us are naturally risk averse while others absolutely enjoy the thrill.

Learning to invest means learning to weigh potential returns against risk. There’s really no way around it: no investment is absolutely safe, and there’s also no guarantee that an investment will work out in your favor. So, let’s just say that investing is about taking “calculated risks.”

Nevertheless, the risk of losing money—no matter how seemingly intelligent or calculated your approach—can be daunting. That’s why it’s important for you to really get to know your risk tolerance level. When it comes to your choice of assets, it’s important to bear in mind that some securities are riskier than others.

Investment time horizon can also significantly affect your views on risk. Changes in your outlook may require a shift in your investment style and risk expectations. For instance, saving toward a short-term goal might require a lower risk tolerance, whereas a longer investing horizon can give your portfolio time to smooth out the occasional bumps in the market. But again, it depends on your risk tolerance, financial goals, and overall knowledge and experience.

Match Investments to Your Goals and Risk Tolerance

After you’ve decided on the purpose of your purchase and your personal style preference, finding the right handbag becomes a matter of researching and screening. The same is true for investing. Which financial instruments might best help you achieve your goals? And how willing might you be to accept added risk in pursuit of potentially higher returns?

If you’re interested in stocks, you might want to learn more about the different categories by which stocks are often grouped, such as small caps, mid caps, and large caps. You might also want to learn about stocks in different market sectors such as technology, energy, or health care. These are just a few common stock categories. And each category emphasizes different aspects of a stock’s composition, as well as its potential response to market events.

Do you like the idea of individual stocks and stock sectors with targeted exposure, or would you rather diversify across the broader market? Many who are learning investing basics choose to begin with exchange-traded funds (ETFs), which can target the performance of broad-based indices such as the S&P 500. After deciding which assets might best suit your investment goals, it may be time to start.

Still not sure? We can help with additional education resources, from webcasts, articles, and videos to fully immersive courses. And if you have questions as you learn, feel free to reach out to a specialist via phone, email, or a visit to a local branch.   

Branching Out: Explore Investing Styles and Strategies

New shoppers gain confidence after a few successful purchases. Confidence lends shoppers the ability to explore niche brands and adventurous design in their future shopping activities. When investing, as with shopping, after getting comfortable with the choices you’ve made, it may be time to expand your horizons. The more you participate in the markets as an investor, the more you’ll experience the expansive depth and breadth that the financial world has to offer. Markets are dynamic and constantly changing. Not only might you find yourself monitoring the financial markets regularly, but you might also find yourself constantly needing to upgrade your market knowledge.

There are plenty of basic to advanced concepts that can help, depending on your goals and experience. Perhaps you’re more comfortable taking an analytic approach to analyzing and would like to better understand how active traders use technical analysis and charting. Maybe you’re interested in learning how to approach the different phases of a market cycle, or how to take advantage of a market decline. And, it couldn’t hurt to brush up on asset allocation and portfolio diversification basics. Once again, TD Ameritrade can help.

It’s a big world out there, ready for you to explore and embrace one investment at a time.

Key Takeaways:

  • Learn which products and investment types match your objectives and risk tolerance.
  • Branch out by learning advanced concepts and strategies such as fundamental and technical analysis, asset allocation, and diversification.

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