/Here’s what you need to know before starting to invest
Here’s what you need to know before starting to invest

Here’s what you need to know before starting to invest

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Young investors are piling into stocks. Yet before you follow their lead, there are several things you should do first.

Otherwise, you could get burned.

“Sometimes the shiny object or the stock that is being flashed around the screen or talked about on Twitter gets the most attention,” said Amy Richardson, a certified financial planner with Schwab Intelligent Portfolios Premium.

“You need to think about, is that the right investment for you?” she added. “It is always about being informed and making sure that you do your research so that you feel comfortable with the investment.”

For instance, traders who bought GameStop during the Reddit-fueled buying spree could have lost a lot of money, depending on when they bought and sold. The video game retailer started the year at under $20 a share and on Jan. 28 hit a high of $483. It briefly fell below $50 at one point in February and is now hovering around $150 per share.

“Do I think it’s dangerous to invest based on what they read on social media?,” said Winnie Sun, co-founder and managing director of Irvine, California-based Sun Group Wealth Partner. “It can be, but doesn’t necessarily have to be a bad thing.”

Here’s what you should consider before you start investing.

Ensure your financial house is in order

Choose investments wisely

She suggests picking maybe two stocks from a list of six, for example, and then for the others try to find a fund in the same industry or one that holds that particular stock.

Also consider your risk tolerance, which means how comfortable you are when the market goes down.

“That should guide you how much you invest into stocks, and how much you want to keep in a more conservative investment, like a bond fund,” Richardson noted.

To get the most out of your investments, think long-term.

“Getting in and out of stocks has proven time over time to not produce good long-term returns,” Richardson said. “It is all about staying in the market.”

Serious money vs. play money

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