Stock finance

Investing is something many people to do build their wealth.

But for first-timers, making money can be easier said than done if you don’t understand what you’re doing or have the right resources, according to Barbara Camaglia, president and adviser at Legacy Financial Advisors in Beachwood; Grant Davis and Michael Frayman, senior vice president and managing director, at the Davis Frayman Financial Group of Raymond James in Beachwood; and Rob Herman, senior managing director of Gries Financial Partners in Cincinnati, which also has a location in Cleveland.

“The best thing to do is learn about personal finance, like credit, debt, savings and investment,” Frayman said. “We believe that new investors should make sure to consider investing in both pre-tax and post-tax accounts. Lastly, we prefer to see new investors act slowly and steadily. Investing is more like a marathon than a sprint.”

Herman suggested first-time investors, especially those without a lot of investment savings set aside, look into opening a brokerage account at a firm like Fidelity or Schwab, or an online platform like Betterment.

“They’re a great way to start putting away money every month and building up a nest egg,” Herman noted. “Picking individual stocks is generally not the way to go. Rather, it makes more sense to pick a combination of passive index investing, via Exchange Traded Funds, and active managers, via mutual funds, that allow for diversified investments across stocks, bonds and low correlation alternative investments.”

Young people and first-time investors should also do their best to avoid pitfalls and fads within investing, and focus on building wealth slowly, Davis suggested. An example would be to open a Roth IRA as soon as you have earnings and to save about 10% into a diversified mutual fund.

“It is also important to understand that saving and investing should be done with ‘free cash flow,’” Davis noted. “We discourage carrying credit card balances. We have seen new investors accumulate credit card debt to save and invest. This can be a bad idea with credit cards charging high rates.”

According to Camaglia, investing is easier today than ever before. But, there are a few things first-time investors should be asking themselves before diving in.

“A first-time investor needs to ask what they are investing for, what their goals are along with their time frames, and their risk tolerance,” she explained. “They also need to evaluate how they can invest. Also, diversification among investments is important to incorporate as well as the tax aspects of different accounts. It is important as a way to mitigate the downside.”

Many people will attempt to try and time the market to determine the best time to invest, but Herman explained that any time can be considered “the best” time to give it a try.

“Timing the market is a fool’s errand,” he said. “You may time it correctly on occasion, but it’s unlikely consistently. The key is to keep investing money, in a responsible, non-speculative way, month after month, year after year, to average out market fluctuations that will invariably occur. In the long run, this will benefit your net worth a great deal.”

Frayman said, “The best time to begin is when you are young and able to take advantage of compounding our wealth. But timing the market is nearly impossible for the vast majority of investors. There is no argument here – we prefer to see investors take the slow and steady approach.”

For first-time investors, it could be a smart idea to consult a financial professional during the investment process.

“I help clients organize their financial life and build their portfolio by determining the appropriate foundation,” Camaglia said. “The foundation consists of their cash outflow or expenses now and in the future, in conjunction with their cash inflows and assets. Then we incorporate their risk tolerance and take advantage of the tax laws as much as we can.”

Davis noted, “Working with a financial adviser can help investors maintain discipline when making and reviewing their investments. Financial advisers can help by mitigating the emotions of investing, which is harder to do when investing alone.”

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