Steps to Picking Investments: From a Financial Advisor

Opening and funding an investment account is a significant first step in prioritizing your financial goals. However, there's another essential step you can’t afford to overlook: selecting and purchasing your investments. Without taking this step, your money may remain idle in cash or a default money market account, missing out on its full growth potential.

Here are 4 steps to help you choose investments and ensure they work for you over the long term:

1. Develop a Strategy

Investing without a plan is like traveling without a map. Start building your strategy by answering two key questions:

What’s your investment timeline? This is your time horizon, or how long you plan to stay invested. Generally, the longer you invest, the more time your money has to grow and recover from market fluctuations. A longer horizon may also allow you to take on more risk.

What’s your comfort with risk? This is your risk tolerance—how much uncertainty you’re willing to accept regarding potential losses.

Market ups and downs are normal in investing. It’s important to understand how you feel about risk. You should also know if you can handle it financially. Understanding these factors will help you stick to your plan and reach your goals.

2. Explore Investment Options

With your timeline and risk tolerance in mind, evaluate your investment choices. Here are some common options:

●      Stocks: When you buy a stock, you’re purchasing a share of ownership in a company. Stocks can provide good returns, but they also come with higher risks. These risks are due to price changes from company performance, market trends, and news. Before investing in individual stocks, research carefully and diversify to reduce risk.

●      Bonds: Bonds are essentially loans you provide to governments or companies, which repay you with interest. Bonds are usually seen as less risky than stocks. They are rated to help investors understand if the issuer can repay.

●      ETFs (Exchange-Traded Funds): ETFs allow you to invest in a group of securities, like stocks or bonds, in a single transaction. They’re designed to follow specific themes, industries, or indexes (e.g., the S&P 500 or Nasdaq Composite). ETFs offer diversification, which makes them less risky than individual stocks.

●      Mutual Funds: Mutual funds pool money from many investors to buy a mix of stocks, bonds, or other assets. These funds are often actively managed by professionals and provide diversification. Unlike ETFs, mutual funds trade once a day after the market closes, so their prices are updated only at that time.

3. Purchase Your Investments

Once you’ve chosen your investments, it’s time to put your plan into action. Use the funds in your account to buy the investments you’ve selected. This step ensures your money starts working toward your goals.

4. Monitor and Adjust

As your life evolves, so will your goals, risk tolerance, and time horizon. Periodically review your investment strategy to make sure it aligns with your current situation. Adjust your portfolio when necessary to stay on track.

Remember, you don’t have to navigate this journey alone. If you have questions or need guidance, we’re here to help. Investing is personal, but you’re never without support.

Sources:

https://www.fidelity.com/learning-center/smart-money/how-to-pick-investments

Disclosures:

This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

This material is provided as a courtesy and for educational purposes only.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

Stocks Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

Bonds A bond is a fixed-income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer.