Takeaways
- Investing involves committing capital toward a security or endeavor with the intent of gaining profit or income
- Investing comes with the risk of losses and potential for growth
- Before you start investing, you should identify your goals, budget, risk and selection strategies, and diversification efforts
- Other ideas to build a solid investment strategy include researching successful investors, identifying modern trends and taking the long-term approach
If you’re unfamiliar with the world of stocks, bonds and ETFs, you’re not alone. And if you’re interested in gaining your financial freedom in 2022, you don’t have to do it alone.
Thanks to the internet, you can find success in investing in the stock market whether you’re a professional or a novice. And thanks to platforms like Q.ai, you don’t even have to go scouring the depths of the internet to figure out how to invest. Q.ai leverages AI to help you maximize returns and minimize risk without ever lifting a finger.
However, nonetheless, not only can solid financial footing help you meet your needs, but reducing stress around money can have other positive effects like:
- Improvements to mental and physical health
- Successful relationships
- Satisfaction from achieving your goals
- Opportunities for building wealth long-term
So, instead of letting monetary stress bring you down in 2022, we’re here to help you make genius money moves.
What is investing?
Essentially, investing is the act of putting money into different securities, or investment vehicles, in the hopes that these securities will rise in price and/or pay out profits. In particular, investing in the stock market involves buying shares of companies that then (hopefully) rise in price. Some companies also pay dividends on their shares at regular intervals.
The end goal of investing is to spread your wealth in different vehicles that grow your money over time. But it’s unwise to toss your cash into the first stock that catches your eye. Ultimately, you should aim to meet or even beat the market.
To wit, we’ve gathered 15 tips, tricks and ideas to help you build an investment strategy that works for you. With the right strategy – and maybe a little help from AI – you can achieve financial freedom in 2022.
Tip #1: Start from the beginning
The first step on the path to financial freedom is deciding how you want to achieve that freedom.
Differentiate between investments and savings
A crucial early step is accounting for your budget. Though investing can help build wealth, it’s not a riskless endeavor; as such, you’ll want to separate your investing and saving dollars.
Typically, you shouldn’t invest money you’ll need in the next 3-5 years, including your:
- Emergency fund
- Tuition payments
- Down payment or rental payments
Identify your investor profile
Then start by deciding why you’re investing. Whether it’s to build a financial cushion, buy a house or save for retirement, you’ll need to flesh out your investor profile by answering a few critical questions.
Do you want to:
- Take an active or passive approach to investing?
- Do your own research or rely on experts?
- Invest in individual stocks, mutual funds or ETFs?
Fortunately, regardless of your answers, you can still secure your future with investing – but in different ways.
Play to your risk tolerance
Your investor profile also includes your risk tolerance, or how much volatility you can reasonably afford (both financially and emotionally). Typically, your risk tolerance is informed by your age, goals, time horizon and emotional makeup.
Generally, as you age, you’ll want to move more of your capital into less volatile investments (like bonds) and out of riskier securities (like stocks). In doing so, you’ll protect your finances from sudden upheavals as you age into retirement.
Tip #2: Do your research
Even if you plan to pay an advisor to assist you, it’s wise to have a general notion of the stock market investing ideas you’re using to build wealth.
Compare investment strategies
First, you’ll want to research different investment strategies and determine which suits you best. Some common strategies include:
- Growth investing: putting your dollars into companies that show (or you believe will show) above-average growth
- Value investing: investing in companies that you believe the market has overlooked or undervalued
- Momentum investing: buying stocks experiencing an uptrend while selling (or short selling) stocks that they think will continue to drop
- Dollar-cost averaging: investing at regular intervals regardless of a security’s price, thereby buying the highs, lows, and everything in-between
- Trading: a riskier strategy that involves trying to “time” the market by buying low and selling high within hours, days or weeks
- Income investing: building an investment portfolio focused on generating regular income, such as through dividends
Look to the greats
A handful of investors have stamped their names in the history books as the greatest of all time. The list includes well-known names like Warren Buffett, Peter Lynch and Philip Fisher.
These investors have all built wealth by perfecting their particular strategies and focusing on the long-term plan. If you want to learn more about financial freedom, their books, interviews and strategies provide excellent insights into the secrets of success.
Identify the best investments in 2022
Aside from selecting a strategy, hands-on investors will want to identify investments they believe will perform well. In 2022, some stocks that may continue to see success include:
- Technology
- E-commerce companies bolstered by the aftermath of the pandemic
- Travel stocks benefiting from the vaccines rollout
- Green investments like clean energy and renewable resources
- Healthcare stocks that continue to see staggering growth post-Covid-19
- Dividend-paying stocks from large, stable companies likely to keep paying out
That said, remember that each of these will come with its own unique risks. At the end of the day, there’s no such thing as a 100% guarantee in investing.
Tip #3: Diversify
Diversification is the process of spreading your wealth across a range of sectors and assets, such as stocks, bonds, ETFs and commodities. In doing so, you can potentially reduce your risk by ensuring your portfolio won’t suffer when one company, sector or security crashes.
Don’t invest more than 10% in individual stocks
Before we dive into the benefits of diversification, a word of caution: it’s rarely wise to invest in individual stocks as a small-time investor. The more of your portfolio is made up of one company, the more you’ll lose if it goes belly-up. As a rule, investing 10% or less of your portfolio in individual securities can help protect your financial future.
Choose different types of investments
You can select from several types of investments in both taxable and tax-advantaged accounts. Beginning investors may benefit from:
- Stocks: individual shares of companies
- Bonds: fixed-income securities wherein an investor loans money to a government or company and receives interest in return
- ETFs: exchange-traded funds that can be comprised of stocks, bonds or both
- Mutual funds: professionally managed investment funds that pool capital from multiple investors to purchase stocks, bonds, and other securities
Diversify across sectors and sizes
Regardless of your specific investment vehicle(s), you’ll also want to diversify across sectors, such as healthcare, utilities and technology. Additionally, you may benefit from splitting funds across market capitalizations, including:
- Small-cap stocks: small companies with greater growth potential (and more risk) and valuations under $2 billion
- Mid-cap stocks: established companies with valuations between $2 billion and $10 billion that blend the benefits of growth and stability
- Large-cap stocks: companies with valuations over $10 billion that have little room for growth but may be less volatile than some of their smaller counterparts
Tip #4: Determine your approach
After you’ve fleshed out your investor profile, strategies and securities, it’s time to select a broker and get the ball rolling.
Start with employer retirement accounts and IRAs
If you’re new to investing, one great place to start is your employer’s 401(k) or other tax-advantaged accounts. For those who are self-employed or don’t have access to an employer account, an IRA (individual retirement account) works, too.
Both types of accounts allow you to select various funds and invest for your future. That said, they typically have strict rules regarding withdrawals and contributions, so you’ll want to brush up with our quick explainer.
Consider online brokers and robo advisors
An online brokerage account is often a quick, easy way to start investing. Most offer a variety of taxable and retirement accounts to choose from. Many also come with access to expert advice, blogs and financial advisors to help you make smart investing decisions.
Robo-advisors are a type of online broker that allows you to obtain the benefits of investing without doing the legwork of selecting securities (or the cost of paying a professional to select for you).
Instead, robo-advisors build an investment profile based around your goals and financial situation, often for a fraction of the cost of a traditional broker. They also provide features like automatic rebalancing and tax-loss harvesting.
Compare costs and features
Before you select a broker, you’ll want to do a quick comparison of their features and fees. Important factors may include:
- Minimum initial investments to sign up
- Educational resources or access to expert advisors
- The presence or absence of trading commissions and high fees
- Types of investments allowed
- Whether they permit day trading or long-term investing only
Tip #5: Play the long game
Think of investing as a long-term thing – not a short-term fling.
Focus on long-term growth
Investing over years and decades has repeatedly proven to be one of the best ways to grow your wealth. While year-to-year performance can fluctuate wildly, over decades, the market generally averages to about 10% gains per year.
Pick a solid strategy – but don’t be afraid to adjust
When you start out, you may want to experiment with different strategies and investments. Just be sure you’re keeping your long-term goals in mind when you do. And as you age, don’t be afraid to adjust your strategy to match your new risk tolerance or life goals.
Build your position gradually
Assuming you don’t have $10,000 in spending money just lying around, you probably won’t be able to achieve a well-diversified portfolio overnight. And that’s more than okay; that’s normal. In fact, trading too often can actually hurt your goals, rather than help them.
Instead, be the turtle –not the hare: in investing, a slow and steady approach is still an effective way to reach your goals. By investing regularly, leveraging strategies like dollar-cost averaging and putting your money into funds, you can set yourself up for financial success in 2022.
Find financial freedom in 2022 with Q.ai
With these tried-and-true ideas for investing in the stock market, it won’t be difficult to start building your financial freedom in 2022. It will take some dedication - but once you’ve built the habit, it’ll be as simple as setting aside a few dollars a month toward your goals.
And if you want to take your efforts step further (or rather, take a step back) you can always enlist the power of artificial intelligence to back your strategy.
Download Q.ai for iOS for more investing content and access to over a dozen AI-powered investment strategies. Start with just $100 and never pay fees or commissions.
