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How to Select Your Next Investment

Selecting your next investment may be as simple as placing an order with your broker and going about your day. But for those who are new, inexperienced, or unsure, the task of investing your first K may seem a bit more monumental.

🤔 How to select your next investment

Q.ai is here to help. We’ve put together a list of seven tips to help you select your next investment with confidence. Whether you’re a first-time investor or a learned guru, these offer a great jumping-off point for your next foray into the stock market.

1. Know your goals and risk tolerance.

Your future goals are a primary driver behind why and how long you invest. While it’s best to play the long game to maximize your reward for retirement, there’s nothing wrong with setting up accounts to pay for college or even to buy a house.

But for every goal you set, keep in mind that you need to save responsibly. For instance, if you want to buy a new car soon and can afford some loss, you may focus on aggressive growth stocks. On the other hand, a retirement portfolio should focus on slower-growing – but far less risky – investments.

2. Make a plan.

Once you know your goals and risk tolerance, you can start drafting an investment plan for your first $1,000. What this looks like will depend on your goals – no two investors will have identical plans. In fact, one investor may have multiple plans for multiple accounts.

No matter what your plan looks like, however, it’s important to leave a little wiggle room. Circumstances and timelines change – and the older you get, the less risk you should take. Thus, you’ll need to revisit your plan and rebalance your portfolio at least once a year to minimize losses.

3. Consider diversification.

Diversification is one way to reduce the risk of losses of your $1,000 investment. This is the practice of spreading your money across securities, industries, and even countries to balance your portfolio.

When you select your next investment, it’s wise to consider how that security or fund will affect your diversification. Keep in mind that goal of a well-diversified portfolio is to see reasonable growth at reasonable risk, whatever that means to you.

4. Keep an eye on commissions.

If you think you’re ready to select your next investment, don’t forget to check out the fees. Buying into funds can be cheaper than purchasing individual stocks upfront – but it’s still not free.

Not to mention, annual charges can eat into your growing profits over time. Thus, it’s crucial to be on the lookout for investing and management fees, the cost of financial advice, and commissions on trades. Make sure you do your due diligence researching relevant pricing structures and hidden costs. If you invest $1,000, that could come with a hefty fee.

5. Once you’re in, don’t obsess.

Research shows that obsessing over your investment portfolio leads to more frequent trades and poorer returns. In fact, plenty of successful investors review their portfolios as little as once or twice per year to rebalance their risk and diversification.

Slight variations, and even significant losses, are unlikely to hold in the long term. Unless you’re a day trader, the fact that Apple is down 5% this week means nothing for the value of your portfolio next year. Furthermore, you don’t want obsessing about potential or realized losses to keep you from putting your money where your retirement is. The only way to see returns from smart investing habits is to keep investing – if you pull out, your money may be “safer,” but you’ll lose value to the corrosive effects of inflation.

What this means for you

Investing can help your money make more money, but you have to get started with selecting your next investment. Get started with what you have, where you are, and follow these tips.

Disclosures

Q.ai is the trade name of Quantalytics Holdings, LLC. Q.ai, LLC is a wholly-owned subsidiary of Quantalytics Holdings, LLC ("Quantalytics"). Quantalytics offers automated financial advice tools through Quantalytics Investment Advisors, LLC ("QAI"), an SEC-registered investment advisor. QIA’s investment advisory services are ONLY available only to residents of the United States. Disclosures concerning QIA’s investment advisory services are available on its Form ADV filed with the SEC. The content in this newsletter is for informational purposes only and does not constitute a comprehensive description of Q.ai's investment advisory services.

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