3 Tips for Beginner Investors to Grow Your Wealth

Investing is a critical tool for building wealth and creating financial security after retirement. By starting out at a young age, you’re already far ahead of many other people in the workforce. At this point, your focus should be on utilizing the best available strategies for maximizing the return on these early investments. But what’s the best course to take? With so many conflicting sources of information available these days, sometimes it’s best to clear away all the confusion and boil the issue down to its most basic concepts. Here are three things you should do to make the most of your wealth.

Keep Your Choices Diverse

We often see how a hot stock creates millionaires overnight, or we may see spikes in precious metal prices that get investors excited about their windfalls. Those stories are true, but they’re also incomplete.
There are far more fortunes lost than made on sudden changes in investment values. By spreading your investments across a variety of options, you can hedge against the market’s inevitable drops by holding onto some steadier tools like bonds. At the same time, you’ll be able to cash in on some of the higher times for the volatile options.
Some other interesting choices exist too. Startups often use convertible note financing systems. This tool allows them to raise money quickly while providing investors with the option to receive either cash (with interest) or a predetermined number of shares of the growing company later on. This type of flexibility is key to a diversified portfolio.

Hold Steady Through Bad Times

The worst thing you can do when you experience those market fluctuations is to take panicked actions. When the bottom drops out–and there’s no doubt that it will someday–you have to remember the big picture. Investors who overreact will lose more money.
The value of an investment is a fluid thing. The same share that’s worth $100 today might be worth $85 tomorrow and $110 next week. The value is moving up and down, but you still have one share. If you panic and sell at the $85 level, you’ll never be able to capture the $110 next week–or the $200 next year.
When you’ve started investing at a young age, you have the ability to ride out tough times because there are many years ahead during which you’ll recover the losses and then some. Investment values are just a sticker price unless you sell. Hold that investment until the sticker price represents an overall gain.

Let Your Calendar Define Your Investment Mix

That brings us to our final point. The older you get, the more conservative your investment mix should be. That’s because you have fewer years in which to recover any losses.
In your earliest years of investing, you can withstand more risk because you have lots of years for your investments to bounce back. That means you can get into the stock market early and stay in it for many years.
As your expected retirement date approaches, you need to start shifting away from the higher-risk instruments. Stop buying stocks and mutual funds so that your money can go into stable options like bonds and treasury bills. Begin moving your existing stock market investments into these safer options as you begin to see them at peak or stable prices. If any of your stock holdings are soft, wait until they have recovered before transferring them.
Be strategic in cashing out. Pace your withdrawals based on their current value and potential for additional growth; if one investment is returning 5% and another 7%, withdraw money from the former before the latter, assuming that fees, tax liability, and other factors are equal. In fact, it’s best to consult with a tax professional before withdrawing any funds from your investments. There can be annual limits on how much you can take out as well as the potential for bumping yourself into a higher tax bracket.
It’s not enough simply to start setting aside money while you’re young. You also have to manage it well to maximize return, minimize tax impacts, and reduce the risk of mistakes along the way. These basic strategies will start you on a course toward the best possible financial position when your working days are over.