She’s just 18 years old. She’s a freshman in college studying industrial design. And before she left for school, she made her very first investment in stocks and bonds. It took her all of five minutes. I was so proud of her.

Over the past few months I have had the opportunity to talk with three first-time investors. In addition to my friend’s daughter mentioned above, I’ve also spoken with two friends in their twenties. One had never invested. The other had a 403(b), but really no idea how to create an investment plan or how to evaluate the mutual funds in his retirement account.

These conversations were eye-opening. At first I tried to reduce a lifetime of investing experience into a 20 minute conversation. I learned that many people really don’t care about emerging markets, REITs, or standard deviation. They also aren’t that interested in the debate between actively managed investments versus index funds.

What they do care about is risk. They want to understand the chances of losing money. Here it’s helpful to distinguish between volatility, which the industry defines as risk, and loss of purchasing power, which intelligent investors define as risk. But here again, I’ve gone too far into the weeds for most investors just starting out.

So in the end we talked about 4 things:

Time: Investing in stocks is for the long term. If you will need the money in a couple of years, keep it in a high yield savings account. Investing in stocks should be for a minimum of five years, and ten years is preferable.Diversification: Most investors should diversify across a wide spectrum of investments. The most important decision will be how much to invest in stocks versus bonds. For long term investors, more should be in stocks than bonds.Cost: Even small costs, multiplied over a lifetime of investing, will have a big impact on an investor’s results. It’s wrong to thing that a 1% fee is small. It can easily erode hundreds of thousands of dollars in value over a lifetime.


Source and more:
How To Invest For The Very First Time http://www.sanwomi.com/2018/07/how-to-invest-for-very-first-time.html

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Lovely, thanks.