10 Beginner Investing Questions You Don’t Know to Ask

If you are a beginner investor, you’ve probably heard all the scary things that come along with investing. It’s too complicated. You need too much money to get started. If you don’t have a degree in finance, have connections on Wall Street or have a brilliant brain filled with all the math know-hows – you should stay away from investing altogether.

But if you’re still here and you’re ready to become a beginner investor then you should know about all the benefits of investing such as financial security, building wealth, a retirement nest egg and so on. While investing has its risks, the rewards can be OH SO SWEET.

But…

Before you jump into the stock market, headfirst, there are 10 crucial beginner investing questions you should ask yourself first.

Getting started can be the hardest part, so let’s get right to it…

 Beginner Investing Questions

 1.    Do I need to pay off my debt before I start investing?

 As a beginner investor, you should first figure out if you can afford to invest.

Here’s how…

After paying off your monthly debt amount, taking care of all your other expenses, and putting some money aside for emergencies, do you still have money left over? If the answer is no, then you should probably pay off all your high-interest debts before you start investing. ( If you have debts with very high interest rates (example: credit card debt at 20%), then it would be better to use that extra money to pay off your debts.)

If you do have extra cash left, then taking some of that money and putting it into safe, profitable investments can make wealth-building simple for any beginner investor. (Here’s an example of what those investments look like.)

Once you’ve chosen the investments you’d like to make, check whether the returns on your investments are greater than what your debt is costing you. If that’s a yes, then it does makes sense to invest because, in this scenario, you end up making a profit.

 2.   How much money do I need to start investing?

What’s one thing most beginner investors realize once they start the journey? Just how wrong most people are about how much money is actually needed to start investing. It’s not $10,000… $20,000… Or even $30,000. There is no magic number for this.

You don’t need to wait till you have a certain amount of money saved either. Whether you have $50 or $500 in disposable income, you can start investing!

If you are a beginner investor in today’s world, starting out with a low amount is extremely simple! You can purchase fractions of a stock, you don’t even need a brokerage account and in some cases, a bank account. But for the sake of this article lets stick to the basics…

You can look for financial institutions that have zero balance and transaction fees. Here’s a list to get you started.

3.   What are the risks of investing in stocks?

Like everything else in life, investing is not without its risks. No matter how carefully you assess and choose a stock, there is always the possibility of its value remaining stagnant, or worse, dropping down.

Stock prices are very volatile, erratic, and out of our control. So, it is always best to manage your risks so that you can still achieve your financial goals.

4.  Should I invest a lump sum or in increments?

This depends on your risk tolerance. Let’s say you have $1,000. You decide to invest it all at once. Here, you run the risk of buying the stock at its peak. In that case, you’re going to lose money if the prices fall. Ask yourself this: am I okay with the risk of losing that money?

On the other hand, if you invest in increments (say 10% of your salary every month), the risk factor is lower. This option makes much more sense, especially if you are a beginner investor who doesn’t have a higher risk tolerance.

5.   Should I use a broker?

Brokers are financial advisors who know the ins-and-outs of the market. They offer their expert advice depending on the current market trends and essentially design your investing strategy for you.

When it comes to investing for beginners, a broker might be an asset. If you have a broker, you won’t need to micromanage your stock portfolio. They are great for people who want a more hands-off approach. There are also many robo-advisors that use sophisticated algorithms to do everything for you- right from assessing your risk tolerance to choosing the best stocks for you to invest in.

6.  What type of investments should I put my money into at first?

One of the best places to get started as a beginner investor is a 401(k) plan offered by employers. They are easy, simple, and make for a great retirement plan. Moreover, many employers also match the amount you agree to invest. So you get two for the price of one, so to speak.

You can also go for mutual and index funds. They are a great place to start investing for beginners because they are professionally managed, less risky, and diverse in nature. 401(k)s also allow you to hold mutual funds.

But know this…

There’s one thing to focus on as a beginner investor: Time. How much time you have to invest can dictate what type of investments you choose to make.

7.   How long should I let my investments sit?

This depends on your financial goals and risk tolerance. (It also comes back to what we mentioned above – how much time you plan to spend investing.) For example, if your financial goal is a retirement plan or sending your kids to college, then it makes sense to invest long-term (a minimum of three to five years). This is the best option for people with low risk tolerance as you can usually ride out the ups-and-downs of the market if you hold stocks for a long time.

But if you want your money quickly, you can go for short-term investments and sell your shares as soon as there is a rise in prices. But be aware that short-term investments come at a higher risk. (You can also checkout the difference between growth and value stocks.)

8.  When should I sell my stocks?

You should sell your stocks when:

• You want to diversify your portfolio.

• The company has been performing poorly.

• The company changes hands (this may lead to dramatic increases in stock prices, so you'll make a profit).

• You find other stocks that can give greater returns.

• The stock hits its price target (projection of a stock's future price).

• You need the money.

9.  Should I own blue-chip stocks?

Blue chip stocks are highly valued stocks issued by huge companies that have credibility and financial stability. Example: Apple or Microsoft. They have a lower risk factor, are reliable, and give assured returns. As a result, they are considered great investments for a beginner investor.

10. Can a beginner investor start day trading?

This is where things can get tricky…

The question isn’t really “can a beginner investor start day trading” but rather “should a beginner investor start day trading.”

Day trading refers to buying and selling stocks within the same day. They capitalize on the smallest market fluctuations. Day traders are typically well-educated on how the stock market works and have a higher risk tolerance.

It is not advised for a beginner investor to start day trading. Of course, you can learn how to start day trading. But that doesn’t mean you should, especially if you are risk averse.

As a beginner investor you should know this: there is a HUGE difference between trading and investing.

Hopefully this article answers all your beginner investing questions that you might not have known to ask. With all this information in mind, are you ready to get started?