Some things in life demand a high level of expertise and confidence. Think: performing surgery, flying a plane, buying a gift for your mother-in-law. Investing your money for potential long-term growth? Not so much. Yes, making wise, intentional investment choices requires some effort and willingness to learn the basics. But waiting until you're ready to teach the class isn't necessary—and could mean you miss out on the chance to put your money to work in the meantime. Here are 7 ideas to help you become a confident investor.
1. Look to history
While past performance doesn’t guarantee future results, markets have generally risen over time—even after challenging events, like the Great Recession and the COVID pandemic. The longer you’re invested, the longer you might benefit from compounding (when the returns on your investments start generating returns of their own) and bull markets (when stock prices rise over a period of time). In fact, in the 26 bull markets since 1877, stock market values have spiked by a median of 87% over a period lasting a median of 42 months.1 No one can predict the future, of course, but seeing what’s happened historically could make you feel better about the power of investing.
2. Have a plan
No matter the task at hand, you probably feel more equipped to handle it if you’re prepared. With investing, having and sticking to a financial plan that accounts for your goals, time horizon, and risk tolerance might help you better weather inevitable market ups and downs. Your plan could include ensuring your portfolio is diversified, meaning you’re spreading out your money across multiple investment types and sectors, and determining how often you’ll check in on your progress. You could also automate good habits by setting up a recurring investment through direct deposit or bank transfers.
3. Consider investments with built-in diversification
One diversification strategy that might appeal to new investors is considering adding mutual funds and exchange-traded funds (ETFs) to your portfolio. These are baskets of various securities designed to give you exposure to multiple investments in one fell swoop. While fund managers build and maintain the funds themselves, the responsibility of constructing your portfolio, which may include individual mutual funds and ETFs, and rebalancing to align with your goals, risk tolerance, and time horizon rests on the investor.
You could even opt for a single-fund portfolio with certain types of mutual funds called target date funds consisting of an investment mix that automatically shifts as you get closer to your target goal date, and target allocation funds, where you can set a specific asset allocation, like 70% stocks and 30% bonds. These funds can be built and managed by financial professionals, so you don’t have to do as much research as you would if you created a portfolio from scratch yourself.
Another option could be managed account offerings. For example, Fidelity Go® is our robo advisor that builds an investment strategy to meet your needs based on your answers to a few questions—and rebalances your portfolio on your behalf to keep you on track toward meeting your goal.
4. Practice doing the real thing
If you’re still shaking off some nervousness, consider testing out your investing strategy. Watch lists can be found on Fidelity.com under the "News & Research" tab. You can also create watch lists on the Fidelity mobile app by tapping "Investing" and selecting "Watch Lists" at the top of the page, then choosing “Default Watch List” and “+ Create new watch list” in the pop-up on the bottom. (You might see Watch Lists along the bottom once you’re logged in, and you can tap that instead.) Getting a sneak peek of how your plan would work out could make you feel more secure about enacting it. Besides, the more you do something—like play a sport or speak a foreign language—the better at it you can become. Think of watch lists as training wheels before you begin to invest for real.
5. Learn the lingo
Familiarize yourself with key investing terms and strategies by doing some online reading. Understanding the language and the basics can help investing seem less intimidating. Luckily, it’s easy to search for and find high-quality education on the subject. Need a hint? Fidelity’s interactive investing lessons and Learn to Invest experience aim to demystify investing for beginners.
6. Psych yourself up to stay on track
It can take a while to see meaningful gains from investing, potentially making you feel like you’re doing something wrong. Instead of giving into insecurity, try these brain tricks rooted in behavioral psychology to help stay focused on your goals.
- Practice gratitude to increase your patience. David DeSteno, a psychology professor at Northeastern University, published a study in the journal Emotion that found people who were more gracious were more willing to wait for a higher payment than take a smaller payment sooner. Apply that by counting your blessings to potentially become more comfortable thinking long-term, which may align better anyway with your far-off investment goals, like retirement or college tuition for a child.
- Think of all the ways you invest already. Paying upfront for a year-long gym membership. Buying coffee beans in bulk for a lower per-ounce price than a smaller package. You’re betting you’ll use these enough to make the higher initial cost worth it. Acknowledging you’ve been investing your money in ways like these for a while could make investing in securities, like stocks and funds that you anticipate increasing in value over time, seem like less of a leap.
- Keep your eyes on the prize. Find a picture that represents what you’re investing for—whether a new home, a blowout vacation, or a relaxing retirement. Place it near where you’re likely to make your investing moves, such as near a desk. Research has shown that visualization can help increase motivation, so having a visual reminder close by could make your goal more concrete, encourage you to keep investing, and overshadow self-doubt.
7. Consider talking to a pro
Working with a financial professional can help you feel more confident about reaching your goals, according to a Fidelity Investor Insights Study.2 Depending on your priorities, you could talk to a pro about choosing investments, and about investing strategies such as tax-efficient investing. Though there could be fees associated with working with a consultant, having someone knowledgeable in your corner could build confidence that you’re making the right choices for you.