7 Steps to a Successful Investment Journey (2024)

The most successful investors were not made in aday. Learning the ins and outs of the financial world and your personality as an investortakes time and patience, not to mention trial and error. In this article, we'll lead you through the first seven steps of your expedition into investing and show you what to look out for along the way.

Key Takeaways

  • Your investing journey starts with a plan and a time frame; when you know how long you're investing for and what you hope to gain, you can put the structure in place to achieve it.
  • Next, learn about how the market works, figure out what investment strategy is best for you, and determine what kind of investor you are.
  • Be careful who you're taking advice from and be mindful of your own prejudices and assumptions, as you find the right path for you.
  • Make sure you understand this is a long-term journey so that you won't get tripped up by short-term setbacks; always stay open and learn from your mistakes.

1. Getting Started in Investing

Successful investing is a journey, not a one-time event, and you'll need to prepare yourself as if you were going on a long trip. Begin by defining your destination,then plan your investment journey accordingly. For example, are you looking to retire in 20 years at age 55? How much money will you need to do this? You must first ask these questions. The plan that you come up with will depend on your investment goals.

2. Know What Works in the Market

Read books or take an investment course that deals with modern financial ideas. The people who came up with theories such as portfolio optimization, diversification, and market efficiency received their Nobel prizes for good reason. Investing is a combination of science (financial fundamentals) and art (qualitative factors).

The scientific aspect of finance is a solid place to start and should not be ignored. If science is not your strong suit, don't fret. There are many texts, such as Stocks for the long runby Jeremy Siegel, that explain high-level finance ideas in a way that is easy to understand.

Once you know what works in the market, you can come up with simple rules that work for you. For example, Warren Buffett is one of the most successful investors ever. His simple investment style is summed up in this well-known quote: "Never invest in a business you cannot understand." It has served him well. While he missed the tech upturn, he avoided the subsequent devastating downturn of the high-tech bubble of 2000.

3.Know Your Investment Strategy

Nobody knows you and your situation better than you do. Therefore, you may be the most qualified person to do your own investing—all you need is a bit of help. Identify the personality traits that willassist you or prevent you from investing successfully, and manage them accordingly.

A very useful behavioral model that helps investors to understand themselves was developed byfund managers Tom Bailard, Larry Biehl, and Ron Kaiser.

7 Steps to a Successful Investment Journey (1)

The model classifies investors according to two personality characteristics: method of action (careful or impetuous) and level of confidence (confident or anxious).

Based on these personality traits, the divides investors into five groups:

  • Individualist – careful and confident, often takes a do-it-yourselfapproach
  • Adventurer – volatile, entrepreneurial, and strong-willed
  • Celebrity – a follower of the latest investment fads
  • Guardian – highly risk-averse, wealth preserver
  • Straight Arrow– shares the characteristics of all of the above equally

Not surprisingly, the best investment results tend to be realized by an individualist, or someone who exhibits analytical behavior and confidence and has a good eye for value. However, if you determine that your personality traits resemble those of an adventurer, you can still achieve investment success if you adjust your strategy accordingly.

In other words, regardless of which group you fit into, you should manage your core assets in a systematic and disciplined way.

4. Know Your Friends and Enemies

Beware of false friends who only pretend to be on your side, such as certain unscrupulous investment professionals whose interests may conflict with yours. You must also remember that, as an investor, you are competing with large financial institutions that have more resources, including greater and faster access to information.

Bear in mind you are potentially your own worst enemy. Depending on your personality, strategy, and particular circ*mstances, you may be sabotaging your own success. A guardian would be going against their personality type if they were to follow the latest market craze and seek short-term profits.

Because you are risk-averse and a wealth preserver, you would be affected far more by large losses that can result from high-risk, high-return investments. Be honest with yourself, and identify and modify the factors preventing you from investing successfully ormoving you away from your comfort zone.

5. Find the Right Investing Path

Your level of knowledge, personality, and resources should determine the path you choose. Generally, investors adopt one of the following strategies:

  • Don't put all of your eggs in one basket. In other words, diversify.
  • Put all of your eggs in one basket, but watch your basket carefully.
  • Combine both of these strategies by making tactical bets on a core passive portfolio.

Most successful investors start with low-risk diversified portfolios and gradually learn by doing. As investors gain greater knowledge over time, they become better suited to taking a more active stance in their portfolios.

Online brokers have an abundance of tools that can help investors of all levels; we've done an extensive review and ranking of more than 70 online brokers to find the best one for you.

6. Be in It for the LongTerm

Sticking with the optimal long-term strategy may not be the most exciting investing choice. However, your chances of success should increase if you stay the course without letting your emotions, or "false friends," get the upper hand.

7. Be Willing to Learn

The market is hard to predict, but one thing is certain: it will be volatile. Learning to be a successful investor is a gradual process and the investment journey is typically a long one. At times, the market will prove you wrong. Acknowledge that and learn from your mistakes.

Whether you are just getting started or want to improve your skills, check out the Investopedia Academy where we have dozens of online courses for every kind of investor.

How Should a Beginner Start to Invest?

The first step a new investor should take is to determine their investment goals "Why are you investing?" Are you planning for retirement? Saving up to buy a house? Knowing your goals will guide your investment decisions. From there, determine your investment vehicles, such as purchasing stocks, investing in ETFs or mutual funds, setting up a retirement account, and so on. You should also consider how much you want to invest as well as your time horizon.

What Are Good Beginner Investments?

One of the best ways to start investing is by contributing to your retirement account at work if you have one. If your company has a 401(k) for example, you can start contributing there. If it does not, you can start retirement planning on your own with an IRA. From there, a simple way to invest is by putting money in an index fund; funds that track an index such as the S&P 500. These funds, particularly exchange-traded funds (ETFs), are easy to buy and sell, come with low fees, and provide a wide breadth of exposure to the markets.

How Much Money Do I Need to Start Investing?

You can start investing with any amount of money. If you have a retirement plan at work, you can allocate part of your salary to contribute to the plan. If there is a stock you want to buy, you only need enough to buy one share to get started.

The Bottom Line

Starting to invest can be an exciting time but also challenging for newcomers. There are lots of financial products and plenty of different investment advice out there. As you start, first educate yourself on investing, lay out your financial goals, and don't rush to make a fortune. Taking the time to learn about investing and carefully making the right choices for you should allow you to generate a tidy return.

7 Steps to a Successful Investment Journey (2024)


7 Steps to a Successful Investment Journey? ›

This in itself is not a sign of a failed break out. However, if the stock falls 7% or more below the entry, it triggers the 7% sell rule. It is time to exit the position before it does further damage.

What are the 7 steps of the portfolio process? ›

Processes of Portfolio Management
  • Step 1 – Identification of objectives. ...
  • Step 2 – Estimating the capital market. ...
  • Step 3 – Decisions about asset allocation. ...
  • Step 4 – Formulating suitable portfolio strategies. ...
  • Step 5 – Selecting of profitable investment and securities. ...
  • Step 6 – Implementing portfolio. ...
  • Step 7 – ...
  • Step 8 –

What are 7 strategies you can use in making a wise investment? ›

  • Investing involves a lot more than simply buying and selling stocks. To be successful, you need a strategy — an approach or system that helps inform your investment decisions. ...
  • Passive investing. ...
  • Value investing. ...
  • Growth investing. ...
  • Momentum investing. ...
  • Dividend investing. ...
  • Buy-and-hold. ...
  • Dollar-cost averaging.
May 12, 2023

What are the 5 golden rules of investing? ›

The golden rules of investing
  • If you can't afford to invest yet, don't. It's true that starting to invest early can give your investments more time to grow over the long term. ...
  • Set your investment expectations. ...
  • Understand your investment. ...
  • Diversify. ...
  • Take a long-term view. ...
  • Keep on top of your investments.

What is the 7% rule in stocks? ›

This in itself is not a sign of a failed break out. However, if the stock falls 7% or more below the entry, it triggers the 7% sell rule. It is time to exit the position before it does further damage.

What are the key stages of an investment process? ›

5 important investment management process steps
  • Evaluating your investment goals. Before you start investing, it is essential to evaluate your investment goals. ...
  • Evaluating your financial situation. ...
  • Asset allocation: Building a balanced portfolio. ...
  • Choosing the right investment strategy. ...
  • Track and manage your portfolio.
Mar 19, 2024

What is the 5 portfolio rule? ›

This rule suggests that investors should not allocate more than 5% of their portfolio in any one stock or investment. The idea behind this rule is to limit the potential risk to the overall portfolio if one investment does not perform as expected.

What is the power of 7 in investing? ›

We saw in the previous section that investing in the S&P 500 has historically allowed investors to double their money about every six or seven years. Your initial $1,000 investment will grow to $2,000 by year 7, $4,000 by year 14, and $6,000 by year 18.

What is the 7 12 investment strategy? ›

Unlike a traditional two-asset 60-40 balanced fund, the 7Twelve balanced strategy uses multiple asset classes in an effort to enhance performance and/or reduce risk. The '7' of 7Twelve represents the suggested number of asset classes to include in your portfolio. The 'Twelve' represents the 12 underlying investments.

What is the wisest thing to invest in? ›

11 best investments right now
  • High-yield savings accounts.
  • Certificates of deposit (CDs)
  • Bonds.
  • Money market funds.
  • Mutual funds.
  • Index Funds.
  • Exchange-traded funds.
  • Stocks.

What is Warren Buffett's golden rule? ›

Let's kick it off with some timeless advice from legendary investor Warren Buffett, who said “Rule No. 1 is never lose money. Rule No. 2 is never forget Rule No. 1.” The Oracle of Omaha's advice stresses the importance of avoiding loss in your portfolio.

What are Warren Buffett's 5 rules of investing? ›

Here's Buffett's take on the five basic rules of investing.
  • Never lose money. ...
  • Never invest in businesses you cannot understand. ...
  • Our favorite holding period is forever. ...
  • Never invest with borrowed money. ...
  • Be fearful when others are greedy.
Jan 11, 2023

What are the 5 pillars of investment? ›

These five pillars – ESG investing, community impact investment, shareholder engagement & policy work, direct private investment, and philanthropy – can be practiced individually or collectively, enabling you to maximize the positive impact of your wealth while also benefiting others and the world.

How to double money in 7 years? ›

All you do is divide 72 by the fixed rate of return to get the number of years it will take for your initial investment to double. You would need to earn 10% per year to double your money in a little over seven years.

What is Warren Buffett's investing strategy? ›

Warren Buffett is perhaps the best example of the power of long-term compounding. Buffett uses compound interest, dividend reinvestment, and the power of constantly reinvesting the operating cash flow generated by Berkshire's businesses to his advantage.

What is No 1 rule of trading? ›

Rule 1: Always Use a Trading Plan

You need a trading plan because it can assist you with making coherent trading decisions and define the boundaries of your optimal trade. A decent trading plan will assist you with avoiding making passionate decisions without giving it much thought.

What are the stages of a portfolio? ›

There are three major stages: planning, execution, and feedback.

What are the 6 portfolio development phases? ›


These include (1) col- lection of a wide variety of artifacts, (2) projection of a purpose for the portfolio, (3) selection of artifacts for a specific portfolio purpose, (4) reflection on the value and role of each artifact, and (5) presentation of the portfolio.

What are the steps in portfolio investment process? ›

Once a portfolio is in place, it's important to monitor the investment and ideally reassess goals annually, making changes as needed.
  1. Step 1: Assess the Current Situation. ...
  2. Step 2: Establish Investment Objectives. ...
  3. Step 3: Determine Asset Allocation. ...
  4. Step 4: Select Investment Options. ...
  5. Step 5: Monitor, Measure, and Rebalance.

What 5 steps should you take when evaluating your portfolio? ›

Stay on Track: 5 key steps to follow to review your investment...
  1. Collect necessary information. Gather account statements, reports, and any pertinent documents associated with your investments. ...
  2. Assess your investment portfolio. ...
  3. Evaluate portfolio performance. ...
  4. Check for possible rebalancing. ...
  5. Review tax implications.
Mar 3, 2024

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