As brokerages simplify digital investing and reduce or eliminate commission fees, it's easier than ever to start investing. The mental barrier, however, can be a tougher hurdle to overcome.
Getting into the right mindset and sticking to a few solid strategies can boost your confidence more than you might expect. Here are a few basic tips to help keep you moving from "planning to invest" toward "confidently invested."
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1. Find your ‘why’
You might be investing for retirement, for a first home or for future generations. No matter what your ‘why’ is, defining it is key to staying motivated when the market gets bumpy. And once you have your purpose, you can decide on a roadmap to match.
Your tactical plan when setting investing goals:
Define your timeline: Is this money for 5 years from now or 30? Shorter timelines usually correspond to more conservative investments (like bonds), while longer timelines might be better suited to handle the ups and downs of riskier securities, such as stocks
Automate your contributions: Don’t wait to see what’s left at the end of the month. Instead, consider setting up automatic and regular transfers from your bank account to your brokerage account
Schedule time to invest: If you're managing your own portfolio, such as through an Ally Invest Self-Directed Trading account, schedule time to actually invest your transferred funds
A few basic tips can help keep you moving from "planning to invest" toward "confidently invested.”
2. Master the FOMO, or fear of missing out
From social media posts to viral news headlines, it can be tough to ignore the hype around "hot" stocks. When you hear of others making it big, investment peer pressure is a real feeling. However, snap decisions based on popularity and trying to time the market are big threats to a beginner’s portfolio.
Your tactical plan to master investing FOMO:
Implement a "24-Hour Rule": Before buying into a trending stock or asset you saw on social media, wait 24 hours. Use that time to research the company’s fundamentals rather than its "hype"
Mute the noise: If certain social media accounts make you feel anxious or impulsive about your money, unfollow or mute them. Focus on educational resources rather than speculative "tips"
Keep a "Play Money" bucket: If you really want to experiment with trending stocks, plan for it. Decide on a specific limit (e.g., 5%) of your total portfolio to be for "play"
Focus on your goals: Whether it’s headlines, friends or social feeds touting a certain stock, circling back to your “why” for investing can be powerful. Tracking your personal goals can build clarity, commitment and purpose behind your investment plan — and help block out the noise around you
3. Diversify beyond digital assets
Portfolio diversification is one of the most essential strategies to manage your market risk. The premise is simple: By spreading your investments across various asset classes (stocks, bonds, funds, cash) and industries (tech, healthcare, energy), you’re less dependent on the success of any one company or industry.
Your tactical plan for diversification:
Check your sectors: Look at your current holdings. If more than 20% of your money is in one single industry (such as tech), you might look for your next investment in a different sector, such as consumer staples, healthcare or elsewhere
Leverage exchange-traded funds (ETFs) or mutual funds: Instead of trying to pick 50 individual stocks, look into low-cost index funds or ETFs, which allow you to own a "slice" of hundreds of companies with one single purchase
Rebalance annually: Check to see if your portfolio still aligns with your goal. For example, if your stocks grew and now make up 90% of your account, instead of the 70% you wanted, rebalancing would involve selling some stocks to shift some of your portfolio to other securities, such as bonds
Take quiz: Do you know the ins and outs of these different types of investments?
Be the investor you want to be
Becoming a better investor doesn’t have to be a full-time job. It starts by finding resources and guidance you trust and implementing a few basic investing strategies. By tackling small, tactical steps, you can start building the foundation for more confident investing.
