Novice investors should first craft investment goals before committing to a particular course of action to help guide their investment decisions, explains CNN Money. Additionally, such investors should be aware that age influences risk appetite. For this reason, younger investors can generally bear greater risks than their older counterparts.
As age influences the capacity to bear risk, individuals should start investing as early as possible, CNN Money advises. Apart from age, novice investors should also take into account the amount of time they can dedicate to learning about investments when determining their ultimate course of action.
Ideally, beginners with limited time should invest in exchange traded funds, or ETFs, because they tend to be more stable and typically rise in value over time, according to CNN Money. However, novice investors with more time on their hands should consider investing in individual stocks, particularly those issued by blue-chip companies, because they are less volatile.
Before investing, beginners need to consider the costs and fees associated with varied investments, as CNN Money recommends. For this reason, individuals on small budgets should avoid spreading their limited funds over larger numbers of investments because the resulting high costs could significantly erode returns. Instead, they should restrict their choices to one or two firms.
Novice investors also need to be aware of the investment cycle, which starts with the development of investment goals, according to Merrill Edge. The next steps involve opening accounts and selecting pertinent investments followed by periodic monitoring and making any adjustments.