Learn How to Invest: Your Goals, Investment Objectives, and Products

Are you learning the basics of investing? If so, it might help to think of it as if you were moving to a large and unfamiliar city. Your first inclination is to find your way around and really “learn” your surroundings. The city’s sheer size and complexity, however, can make such a task seem quite daunting. How might you start?

You begin with the one location that may seem most familiar, that is, home. Next, you slowly branch out, finding a few easily accessible places that may provide you with the things you need. Over time, you expand your sights toward other distant locations, each with their own unique characteristics. Finally, you spend time at various points across the city, slowly transforming the once-unknown into a familiar place called home.

So what does this have to do with the complex world of financial investments? Everything. The same principles apply, whether your aim is to learn to navigate a big city or learn how to invest money. You start at one place, take a few steps, and slowly expand outward.

Begin by Setting Goals and Investment Objectives

As an investor, your general aim is to grow your money. But this aim can take on many different forms and many smaller goals.

For instance, it might help you to decide the means—instruments and strategies—by which you seek to grow your money.

• Are you interested in purchasing assets that might appreciate in value, such as stocks?
• Are you interested in investing in bonds, where you receive a steady stream of income over a predetermined time period, after which you expect repayment of your principal?
• You might also be interested in pursuing both growth and income via dividend stocks.

Also, determine your investing styles. Are you looking to invest for the short term or long term? Achieving returns across different time horizons may require the use of different instruments and strategies, all of which come with varying levels of risk.

Gauge Your Tolerance for Risk

Learning to invest means learning to weigh potential returns against risk. There’s really no way around it: No investment is absolutely safe, and there’s also no guarantee that an investment will work out in your favor. So, let’s just say that investing is about taking “calculated risks.”

Nevertheless, the risk of losing money—no matter how seemingly intelligent or calculated your approach—can be daunting. This is why it’s important to really get to know your risk tolerance level. When it comes to your choice of assets, it’s important to bear in mind that some securities are riskier than others. This may hold true for both equity and debt securities (i.e., “stocks and bonds”).

Investment time horizon can also significantly affect your views on risk. Changes in your outlook may require a shift in your investment style and risk expectations. For instance, saving toward a short-term goal might require a lower risk tolerance, whereas a longer investing horizon can give your portfolio time to smooth out the occasional bumps in the market. But again, it depends on your risk tolerance, financial goals, and overall knowledge and experience.

Match Investments to Your Goals and Risk Tolerance

Which financial instruments might best help you achieve your goals? And how willing might you be to accept added risk in pursuit of potentially higher returns?

If you’re interested in stocks, you might want to learn more about the different categories by which stocks are often grouped, such as small caps, mid caps, and large caps. You might also want to learn about stocks in different market sectors, such as technology, energy, or health care. These are just a few common stock categories. And each category emphasizes different aspects of a stock’s composition as well as its potential response to market events.

Do you like the idea of individual stocks and stock sectors with targeted exposure, or would you rather diversify across the broader market? Many who are learning investing basics choose to begin with exchange-traded funds (ETFs) and mutual funds, many of which target the performance of broad-based indexes, such as the S&P 500^®. 

If you’re interested in debt securities (i.e., bonds), then you might want to read up on the different kinds, such as corporate, Treasury securities, and municipal bonds.

Once you decide which assets might best suit your investment goals, it may be time to start.

Still not sure? We can help with additional education resources, from webcasts, articles, and videos to fully immersive courses. And if you have questions as you learn to invest, feel free to reach out to a specialist via phone, email, or a visit to a local branch.    

Branching Out: Explore Investing Styles and Strategies

When investing, as with navigating a new city, after getting comfortable with the immediate surroundings, it may be time to expand your horizons beyond the neighborhood. And, as with the city, the more you participate in the markets as an investor, the more you’ll experience the expansive depth and breadth that the financial world has to offer. Markets are dynamic and constantly changing. Not only might you find yourself monitoring the financial markets regularly; you might also find yourself constantly needing to upgrade your market knowledge.

There are plenty of basic to advanced concepts that can help, depending on your goals and experience. Perhaps you’re more comfortable taking an analytic approach to investing and would like to better understand how active traders use technical analysis and charting. Maybe you’re interested in learning how to approach the different phases of a market cycle or how to take advantage of a market decline. And, it couldn’t hurt to brush up on asset allocation and portfolio diversification basics. Once again, TD Ameritrade can help.

It’s a big world out there, ready for you to explore and embrace one neighborhood—and one investment—at a time.