5 Tips for New Investors

August 8, 2024

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What we’ll cover:

Before you start investing, you need to know your goals and understand your tolerance for risk.
Building a foundational knowledge of investing concepts can help boost your confidence as an investor.
A key to reaching your financial goals is understanding how to properly balance risk and reward.

For new investors, there’s much to learn. The number of topics and amount of information available online can be a lot to take in all at once. Where should you begin? Consider starting with these five timeless tips, which can set you on the path towards becoming a smart, confident investor.

1. Know your goals, make an investment plan

Before you start putting together an investment portfolio, you need to know your goals and understand your tolerance for risk. If you don’t have clear goals, there’s little way of knowing whether your investment expectations and the risks you’re taking on are appropriate.

Ask yourself: What are you investing for and how much money are you willing to put up in pursuit of your goals? How long do you plan on staying invested? Basic questions like these can help you make informed decisions when choosing an investment strategy.

For example, let’s say you’re a young professional just starting your career, and your primary investment goal is to build a retirement nest egg. Generally speaking, your investment plan would be one with a long time horizon (we’re talking several decades) to give your investments the time they need to grow.

And when you’re young, many financial experts would suggest an investment portfolio strategy that’s designed for aggressive growth (think: more stocks than bonds). Why? Because as a young investor, time is on your side: Your money has more potential to grow over the years, and your investments have more time to respond to the natural ups and downs of the market.

2. Learn the investing basics: Knowledge is power

If someone asked you to explain diversification or how bonds work, would you be able to provide a simple, helpful answer? Being able to explain a concept to someone else is a good test to see if we really know as much as we think we do about a particular subject.

To invest with confidence, you have to have some foundational knowledge of what you’re getting into. Whether you’re a beginner or an investor with a little more experience, it’s always a good idea to brush up on basic investing terms and concepts. For example, you may generally know what stocks, ETFs and bonds are, but what about their advantages and disadvantages?

Having a solid foundational knowledge can help you avoid common investment mistakes, such as making decisions based out of fear during a time of market volatility or getting swept up by the latest investing trend.

3. Be Goldilocks: Find an investment strategy that is “just right”

How do you find an investment strategy or style that is just right for you? The first step is to figure out what level of risk you’re comfortable with and then diversify your investments in a way that aligns with your risk tolerance. This is where bringing in a financial advisor to talk about your goals and timeline can be helpful. A professional can help lay out an investment strategy that makes sense for you.

Another thing to keep in mind: A key to reaching your financial goals is learning how to properly balance risk against potential reward. Some investors might take too little risk to avoid losses, and others might take too much in hopes of a big score. Playing it safe all the time can be a double-edged sword. While you might avoid big losses, you might also fall short of your financial goals.

But the same goes for taking excessive risks. Although it could potentially lead to a big reward, it could also lead to a big loss. And for some, it might be hard to stomach the anxiety of watching your portfolio value taking a periodic rollercoaster ride in the hunt for high returns.

The important thing to always keep in mind is that market volatility is normal and expected: Don’t panic.

4. Check on your investments regularly

It can be easy to set up an investment account and then forget to check in on it.

But it’s good practice to review your investments from time to time (e.g., quarterly or annually) for a few reasons. One is to make sure your mix of assets still makes sense for your goals.

Another is that your investment portfolio’s mix of assets may have naturally shifted from your original allocation. This can happen when certain assets outperform others within a period of time. For example, if your portfolio’s original asset mix contains 60% stocks, a good showing in the stock markets could increase your stock allocation to, say, 80%.

When this happens, you’ll want to consider rebalancing (or resetting) your portfolio to its original allocation to maintain the original level of risk you’re comfortable with.

It's also a good idea to review other account details such as the fees associated with your investments. When you receive your account statements, pay close attention to the fees you’re being charged. Even if your account fees may seem low at first glance, they can add up and reduce your earnings over time.

For instance, consider an investment of $100,000 over 20 years with a 4% annual return. In 20 years, an annual fee of 1% can reduce your portfolio value by almost $30,000 when compared to a portfolio with an annual fee of 0.25%. That’s $30,000 more you could have invested. Visit the SEC's website here for more examples.

One important question to also ask yourself is whether the performance or value of your investments justifies the fees you’re being charged.

5. Keep calm and carry on during times of volatility

Big downswings in the market can make anyone nervous, but it’s important to stay levelheaded during times of volatility. Resist the urge to make sudden investment decisions out of fear.

For instance, you might feel as if you have to unload troubled assets, but selling your assets at a loss could reduce your overall returns over time.

Keep in mind that market volatility is normal and expected: Don’t panic. Generally, staying invested for the long haul puts you in a good position to reach your long-term investment goals.

Take stocks for example. While stocks may see dramatic swings in the near term during times of market volatility, historically, their value tends to trend upward. This is why many financial experts reiterate the importance of staying the course and focusing on potential growth in the long term rather than market swings in the short term.

Of course, that's often easier said that done, and it's natural to worry when there's market uncertainty. But this is when talking to a financial advisor may be helpful. Their expert insights can put the ups and downs of the market into perspective and help you determine whether you need to make any adjustments to your investment strategy.

This article is for informational purposes only and shall not constitute an offer, solicitation, or recommendation. This article was prepared by and approved by Marcus by Goldman Sachs® but is not a description of any of the products or services offered by and does not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, or any of their affiliates, subsidiaries or divisions. Goldman Sachs Bank USA is not providing any financial, economic, legal, accounting, tax or other recommendation in this article and it is not a substitute for individualized professional advice. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA, or any of its affiliates, none of which are a fiduciary with respect to any person or plan by reason of providing the material or content herein. Neither Goldman Sachs Bank USA, nor any of its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.