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7 Steps To Start Investing Safely 2020

Steps to start investing for beginners can sometimes be intimidating especially if you’ve tried to listen to “experts” on TV and didn’t understand a word they said. The good news is, the majority of “experts” try to sound smart on TV and make investing more intimidating than it is, because they are wealth managers and if you are able to invest on your own, then they won’t have a customer. 

The challenging news is that some people just dive into the markets without any education, try to figure it out on trial and error, and end up losing all their money.

I totally relate to such people because I was one of them. I lost $15K in trial and error trading the markets listening to market noise. Then I decided to invest in myself, get the foundation right, and now that investment continues to pay for itself over and over again. Specifically, I spent tens of thousands of dollars for the Certified Financial Planning program (CFP), the Charted Market Technician Progam (CMT), and so many others.

What I found out, is that while you don’t need to be a math whiz to invest, but there are some important steps you need to take to make your own unique investment plan.  Those include the impact of personal taxes, your stage in the life cycle, and the changing economic environment.

In this video, I show you the 7 steps beginners should take when they start investing. 

 

New to investing? Start off the right way >>

7 Steps to Start Investing Safely

Investing should be conducted on the basis of plans carefully developed to achieve specific goals.

7 Steps In Investing - Investing for Beginners

7 Steps to start Investing – Investing for Beginners

 

Step 1: Meet investment essentials

  • Must cover necessities of life (housing, food, clothing, transportation, taxes, emergency fund)
  • Must cover risks

Calculating your risk tolerance is the most important step of investing. Today I’m not going to go to deep into it, but I have a free masterclass that shows you the steps that I totally encourage you to attend, so you can also get me free risk management toolkit. All you have to do is to go to learn.investdiva.com/yes

 

steps in investing - Investing over LifeCycle

steps to start investing – Investing over LifeCycle

Step 2: Establish investment goals

  • Accumulate retirement funds
  • Enhance income
  • Education
  • Lump-sum purchases
  • Shelter income from taxes

Step 3: Adopt an investment plan (Steps to Start Investing)

Your investment policy statement which outline:

  • Goals
  • Dates that goals are to be achieved
  • Risk tolerance

There’s also a very important technique called Time Value of Money calculation which can give you a more realistic approach to your goals. I’m not gonna go too deep into that because it’s beyond the scope of today’s video.

steps in investing - Time Value of Money

steps to start investing – Time Value of Money

But to just quickly go over it, Time Value of Money helps you calculate the amount of money you need today and the amount of return you’d need in specific time periods to reach your future goals.

Step 4: Evaluate investments

▹Evaluate your investments based on:

  • Risk
  • Return
  • Valuation

For example, if you calculate your risk tolerance and find out you have a low risk tolerance, you might want to focus your portfolio on dividend-paying stocks that are more established. If you have a high risk tolerance, you can focus your portfolio more on up and coming stocks that have huge growth potential but have not yet proved themselves to Wall Street.

This step and the following 3 steps are what I take once a week, on Tuesdays for my own portfolio and my sister and dad’s portfolio with a combined 100 assets, and it takes about an hour… so an hour per week for those of you who are busy and think you need to be stuck to your screen all day in order to invest, which is a myth.

I actually do this LIVE with my premium investing group  (PIG) members so they can get ideas for their investment portfolio and create strategies that are specific to their own unique risk tolerance. 

So if you’re an investing beginner and are worried you won’t have enough time to do this all, I just want to reassure you that once you get the foundation right, then it really isn’t going to take that much time at all. 

I spend way more time on my business and creating these videos and going on TV and writing books than I do on my investment account. And that’s how it’s supposed to be. Because investing is about making your money work for you, not the other way around. Right?

Step 5: Select suitable investments

Select investments from the previous step  that provides:

  • Acceptable levels of risk
  • Adequate progress towards goal achievement

Step 6: Construct a diversified portfolio

Combine assets and asset classed that are not perfectly correlated.

(Don’t put all your eggs in one basket.)

 

Step 7: Manage the profile (Steps to Start Investing)

Adjust your portfolio as necessary. You may need to change investments and/ or allocation percentages

 

Steps to Start Investing: Pay Attention to Business Cycle

Another thing we need to keep in mind is the economic and business life cycle 

 

In this example we are going to focus on the actions of the federal reserve, focusing primarily on the effects of the interest rates, Unemployment, Inflation, and GDP. When the economy is expanding, as you approach the peak, typically inflation is rising at that point. And that becomes the primary concern of the federal reserve. 

In order to control inflation, they will raise interest rates. And that will continue usually throughout the peak period. And although they don’t always time it perfectly, it usually should change shortly after they recognize that the economy is now moving into a contraction phase. So at the peak, you tend to have high inflation and high and rising interest rates. Obviously unemployment is relatively low at this point. And GDP is quite strong. 

As we move into the contraction phase, unemployment begins to rise. And at some point during the contraction, the Fed will react to unemployment, and they will begin to reduce interest rates. And that usually continues until the time that the fed believes that we are pulling out of the contraction. 

One note about the term contraction, you may also see the term recession. 

Technically a recession means two consecutive terms of declining GDP. Contraction may very well be represented by a slowing of the growth rate of the GDP. 

To sum it up, when the fed is most concerned about inflation, they raise the interest rates.

That will cause at some point the economy to contract.

Later, the unemployment begins to rise, and then the fed reacts by reducing interest rates.

 

How To  Take Control Of Your Financial Future >>

 

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One Comment

  • Katie Hurst says:

    I love this article. It’s so simple, clear and easy to follow. All such important points. After starting your Power Course I realised there is so much for me to learn. I’m studying CFP now just simply so I can continue to learn alongside your PIG posts. Thank you Kiana. You’re a breath of fresh air in the staid blue suites world of finance!

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