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12 Steps to Financial Wellness: Step 11

12 Steps to Financial Wellness: Step 11

Authored By: NSCCU on 12/22/2022


The world of investing can be confusing, especially to a first-timer. No worries, though; North Star Community Credit Union can help! Here’s how to start investing in five easy steps.

Step 1: Define your tolerance for risk

If you’re investing, be prepared for potential losses, because there are no sure things. But how much loss can you take? Your risk tolerance will vary according to the time horizon you’re working with, the amount of money you can afford to lose and your objectives.

2.  Define your investment goals

Why are you investing this money? Do you hope to save enough money for a down payment, or to fund your retirement? Or, are you simply looking for a way to grow your money? Identifying your investment goals will help you choose your investment vehicles and the amount of money you’re comfortable investing.

3.  Determine your investing style

Next, you’ll need to find an investing style that suits your personality and investing goals. Here are your basic choices:

  • Active management–personally managing your investments. This can be a great choice for an investor who is confident in their knowledge of the market.
  • Broker/financial advisor–allowing an outsider to manage your investments and make decisions regarding your portfolio.
  • Robo-advisor–an automated option that typically costs less than a traditional broker and works with your goals, risk tolerance level and other personal details.

4. Choose your investment account

You’re ready to choose your investments! Here are some popular first-time investments:

  • Bonds–a loan to a company or government entity which agrees to pay you back in a specified amount of years. You’ll get modest dividends until the bond matures. Bonds are low-risk, but offer lower long-term returns.
  • Exchange traded funds (ETFs)–individual investments bundled together and traded throughout the day, like a stock. Share prices are relatively low.
  • Mutual funds–professionally managed pools of investor funds that focus their investments in different markets. Mutual funds are inherently diversified, making them a good choice for beginner investors.
  • Stocks–a single share or a few shares in a specific company. Be sure to research your chosen company/ies carefully.

5. Learn to diversify and reduce risk

Monitor and adjust your portfolio on a regular basis to keep it diversified and help minimize the risk of loss. Follow these steps to help you get started investing with more confidence.



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