If you're new to investing, starting small, even with just a few dollars each month, can help you build confidence and familiarize yourself with the process. Learn the basics now, and you'll be on your way navigating the investing world.
Know the types of investments
Investors have a variety of asset types to choose from. The most common are:
Stocks: A stock represents owning a portion (i.e., share) of a publicly traded company
Bonds: When you buy a bond, you’re essentially lending money to the issuer (usually a government body) with the expectation that you'll receive that money back after a certain amount of time, plus interest
Mutual funds: These funds include multiple investments, including stocks, bonds, commodities and more. If you own a share, you own a small portion of every asset in the fund
ETFs: Exchange-traded funds (ETFs) are similar to mutual funds, but while mutual funds are priced once daily, ETFs trade throughout the day like stocks
Cryptocurrency: Cryptocurrency is a digital asset secured by blockchain technology. Their prices can be highly volatile, so they are considered speculative investments
Steps to start investing
If you’re new to investing, here are four steps to learn before crafting your portfolio:
1. Set clear investment goals
Similar to saving, identify what goals you’re investing toward, such as retirement, education or generational wealth. Clear goals can help you determine your time horizon and how much risk you might want to take — not to mention motivate you to keep at it.
A typical portfolio might include a mix of high- and low-risk investments. Risk is part of investing, so it's important to determine your risk tolerance level and align your strategy accordingly.
2. Determine your budget
Review your income, regular expenses and emergency savings stash to decide how much you can comfortably commit to investing regularly. Even small contributions can make a difference when made consistently.
3. Choose an investment strategy
Decide how hands-on you want to be and select a mix of investments that fits your risk tolerance and timeline. If you prefer to DIY, an Ally Invest Self-Directed Trading account gives you access to research tools and expert insights to help you evaluate each investment. If a more automated approach to investing sounds more appealing, an Ally Invest Robo Portfolio can help with portfolio management.
If you’re interested in more guidance, working with our advisors through Ally Invest Personal Advice might fit your needs.
Take quiz: Which type of investment account is right for you?
Investing in a variety of different types of assets and sectors can help you reduce risk and overexposure to one market segment.
4. Start to invest
When you feel ready, you can take the crucial step of opening an Ally Invest account. From there, you can research and purchase assets according to your strategy, timeline and risk tolerance. If you’re looking for more how-tos, check out our step-by-step guide to buying your first stock.
Once the difficult step of getting started is over, hopefully, you’ll find yourself less intimidated by investing as you keep at it.
Managing your investments
Even if you automate your investments, investing should never be set-it-and-forget-it. And because over time some investments may make greater returns while others might lose value, it’s smart to rebalance your assets to ensure your portfolio stays in line with your goals.
Understand diversification and asset allocation
Investing in a variety of different types of assets and sectors — a.k.a. crafting a diversified portfolio — can help you reduce risk and overexposure to one market segment because your portfolio captures a wide net of securities.
Monitor your portfolio
Once you're invested, keep a close eye on your portfolio to evaluate performance, which can help inform any rebalancing that’s needed. Use these check-ins to identify specific investments that consistently underperform or exceed their target, so you can adjust deliberately rather than reactively.
Adapt to market challenges
Being in-the-know about market trends and economic indicators can help you make informed investing decisions. Focus on concrete signals — like company earnings or rate hikes — to identify vulnerable areas to reduce your exposure or lean in where you see opportunity.
Enter the market with confidence
For many, the hardest part of investing is getting started because it can be nerve-wracking to put your money toward something you don't know a lot about. Once you take that first step of opening an account, you may feel more confidence about putting your newfound knowledge into action.
