What are the Best Strategies for a New Investor?

It’s no secret that there is more volatility in the market now than there once was in the past, and much of this is due to the emergence of online brokers. The market can change dramatically from year to year, so it’s important to learn all you can about investing and about different asset classes.

Here are some examples of the different asset classes:

  • Stocks
  • Bonds
  • Mutual funds
  • ETFs

Each of them have their own advantages (and disadvantages), and each of them have their own type of risk.

Diversification

I can’t talk about investment strategies without mentioning diversification. Some of you might have heard this term before, and it’s one of the most important concepts in the world of investing. It means that you should invest as widely as you can. In other words, you should invest in a variety of different assets in a variety of industries. The reason why this is important is because it helps to minimize your risk in the market.

Low-Risk Investments

If you’re a new investor, you don’t want to be very aggressive in the market. A more conservative approach is the best way to go, since you’re still learning the aspects of the game. Bonds are always a good safety net that can offset some of the risk found in other asset classes. Mutual funds and ETF’s are also good low-risk investments that can generate solid returns.

Finding the Right Investment Platform

If you’re new to the market, chances are you don’t have a lot to start out with – that is, unless you have a six-figure job as a corporate executive. If you’re on a budget, an online broker is the best way to go, as they have lower fees than most full-service brokers (which can be very expensive). They also have lower account minimums, and some companies have none at all.

I’d like to take a look at some of the online brokers in the market today.

Betterment

This platform is very good for beginners, as it not only has low fees (around 0.15% to 0.35% per trade) but also has a good selection of mutual funds and ETFs. Betterment also has some automation tools that can help to maximize the performance of your portfolio. These tools can help you with:

  • Asset allocation
  • Tax-loss harvesting
  • Portfolio rebalancing

The fact that they are able to do this is a huge advantage for beginning investors, as it can help them get the most out of their assets. Betterment also has no account minimum, so you can put as much (or as little) as you want in the market.

TradeKing

Unlike Betterment, TradeKing is a flat-fee investment broker, and it has a lot of great tools that can help you research and trade stocks. Not to mention, they have great customer service.

Like I said they charge a flat fee for every trade, and it varies between different asset classes. They are broken down as follows:

  • Stocks: $4.95 per trade
  • Options: $0.65 per contract
  • Mutual funds: $9.95 per trade
  • Broker-assisted: $20.00 per trade

As you can see they are priced pretty competitively, even though they are cheaper than most.

Motif Investing

Compared to what you might find on the market, Motif offers a very unique style of investing. They group sets of 30 stocks and ETFs into what are called “motifs” based on certain investment criteria (usually by industry). Each motif costs $9.95, which means you can build a large portfolio with very little upfront investment. In fact, you only need to have a minimum of $250 before you can start trading.

Final Thoughts

Investing can be a dangerous game, which is why you need to take the time to learn the proper strategies and techniques on how to play it well. You don’t want to come out of the pocket too fast, or you may wind up getting tackled before you’re able to advance. So, you want to be more conservative to start out with. Give yourself time to get the feel of the game before you start making more aggressive moves in the market.

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