Investing can help build financial security for the future and help you work towards major life goals like traveling, making large purchases, having a comfortable retirement, and more.
But if you’ve ever wanted to start investing but felt unsure where to begin, you’re not alone. To help, we spoke with Reid Hartsfield, Wealth Strategist at TD Wealth®, who shared his expertise on how to get started.
How to begin the journey
"A good first step is simply taking a first step”, which is understanding and setting your investment goals, Reid said.
It’s important to determine (1) what your investing goals are, (2) how much money you will need to meet your investing goals, (3) how much time you have calculated is required to meet your investing goals and (4) your tolerance for risk and loss. For many investors, short-term goals may include paying off debt and building an emergency fund, while longer term goals include saving for a home, college, or retirement.
For example, you might want to invest to (1) build an emergency fund quickly; (2) plan for a major vacation in 3 years or (3) work towards building a $20,000 down payment on a house in 10 to 15 years. The goals you set and the time required to work towards your goal and your risk appetite will help you decide on the investments you make.
The good news is that you can generally start with small investments as many financial firms require modest minimums to open investment accounts. Although it can feel overwhelming due to the sheer number of options available, there are many online robo-advisers that can streamline the investment process. These digital advisers use algorithms to invest for you based on your stated goals and risk tolerance, making them an option for many first-time investors.
Deciding on Risk
"When we talk about risk in investing, we’re referring to the degree to which an investment fluctuates between the potential for increasing and decreasing in value " Reid said. Investments are inherently risky because the financial markets are volatile and past performance is not guarantee against future performance and there is no guarantee that you will make money on investments. What is important here is to understand your personal tolerance for risk and to invest accordingly.
Types of Investments
Equities, also known as stocks, are generally considered higher risk because owning a share of a company means you’re taking on some of the same risks the company faces. There is the possibility of higher rewards but also the potential for greater losses, depending on the number of equities you hold. Equities may be more suitable for long-term goals, as short-term market fluctuations may have less impact if the company performs well over time.
Bonds may provide a lower-risk investment, Reid explained. When you purchase a bond, you’re essentially loaning money to a company (or government entity) rather than owning a piece of it. In return, you earn interest on the loan. While bonds typically yield lower returns than equities, they generally offer greater security since bondholders have priority over shareholders to be repaid in the event a company goes bankrupt.
Many first-time investors invest in pooled baskets of stocks and bonds know as mutual funds or in exchange traded funds (ETFs) that pool a group of securities into a fund. ETFs can be traded like an individual stock on an exchange. Both mutual funds and ETFs are registered with the SEC and are professionally managed. It is important for new investors to research the mutual funds and ETFs they purchase by reading the mutual fund prospectus or ETF offerings materials carefully to understand the risks involved.
As individuals approach retirement, they often shift toward lower-risk investments like bonds. This may help protect them from the volatility of market downturns, which tend to impact equities more severely than bonds.
Other Investment Options
There are many types of investments you could choose and deciding on which ones are right for you will depend on your goals, time frame and your willingness to accept risk.
For longer-term planning, such as retirement, contributing to a 401(k) through automatic payroll deductions can be an efficient strategy. This approach allows you to save consistently and manage your asset allocation from the start. Individual Retirement Accounts (IRAs) are another option to consider for achieving your long-term financial goals.
Common mistakes
Reid explained that one of the biggest mistakes he sees beginner investors make is taking on too much risk too early. These investors may purchase stocks aiming for higher returns but get frightened when the market dips, leading them to sell off their stocks and potentially incur losses.
In addition, this can backfire because the investor often misses the market’s recovery and the subsequent upswing, which is when the greatest returns can occur.
It’s generally better for most investors to remain in the markets long term, even during periods of volatility. Investing is not a get-rich-quick undertaking, and beginner investors should consider developing a diversified portfolio containing a mix of investments with varying risk levels to balance potential returns.
You can start investing at any age
There’s no better time to begin investing than the present. Starting early is one of the most effective ways to maximize the potential of your investments.
"Invest as much money as you can and that you’re comfortable with now," Reid said. "You’ll be thankful for it later, because investing is all about time”.
For more on personal finance topics
If you have more questions about personal finance topics that matter to you, visit the Learning Center on TD Bank’s website. You can find out more information about TD Bank's services at td.com.
We hope you found this helpful. This article is for informational purposes only and is based on information available as of January 2025 and is subject to change. Any references to third party programs and/or services are informational and may not apply in your specific circumstances. This content is not intended to provide legal, tax, investment, or financial advice or to indicate that a TD Bank, TD Bank affiliate, or third-party product or service is available or right for you.
For specific advice about your unique circumstances, consider talking with a qualified professional.
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