Posted by Maneesh Sethi :: October 19, 2007 @ 10:25 amThe hardest part of starting a new project is taking the first step. Personal finance books and blogs are everywhere, but no advice will make a difference if you don't actually follow it!
Getting started in investing can be a scary thing, but I have found that the easiest way to get started is to have a plan. Do you think you are ready to start? Make a plan! A good investment plan will have the following parts:
1) Available Money - You should know how much you currently can invest. Determine your available investment money by adding up all of your extra money in your bank account, under your mattress, etc., that you have immediate access to. Of course, you don't want to invest everything---you need to leave some money for emergencies and living expenses. Decide what portion of your available money you want to invest and write it down.
2) Amount you wish to continually invest - How much money do you want to put in each month? If you aren’t currently working, you might not be able to consistently put money in. If you are working, however, try to select a percentage that you can invest monthly. 10% is a good starting amount, but I know some people who invest close to 50% of their paychecks.
3) Assess your risk - You should assess your risk tolerance honestly to see how much you are willing to invest. Once you've assessed your risk, you can determine your asset allocation.
4) Asset allocation - I just wrote about dealing with asset allocation. Depending on your risk, you can determine how you should allocate your assets. If you can take on some risk, you might consider putting money in stocks and index funds vs. bonds or CDs. When you invest in person-to-person loans on Lending Club, you can set your risk tolerance level to determine your asset allocation.
5) Choose your individual investments - This step might be the hardest. You need to choose what funds or stocks you want to actually put your money in. Do your research and try to determine which funds and stocks meet your needs. Google is a great resource, as well as Yahoo! Finance and other finance web sites. On Lending Club, when you use LendingMatch™ to build a loan portfolio, the individual investments are the many pieces of loans that are included in your portfolio recommendation.
6) A timeline - This step is crucial: creating a timeline (or schedule) for investing will help you motivate yourself. Plan when you want to make your first investment and when you want to make your monthly payments.
7) Invest! - You need to actually invest your money at some point. Stick to your timeline and you are much more likely to actually get your investment started.
Creating a plan is an excellent way to actually start investing. Follow the steps above, and you'll be invested. Do it sooner rather than later--don't you remember the power of compound interest?
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