Investing your money in the stock market or other forms of long-term investment is not an easy road.  You are bound to commit mistakes, there will be risks, but you could also get the best profits.  One problem in investing is that people have no idea where to start, hence not starting at all.

Be financially sound in the first place – You need to realize that it is best to invest in stocks, bonds, or mutual funds if you do not have any standing credit, or even just up to a few hundred dollars.

Start small – If you are starting up on your investments, you can start small with some stock mutual funds that allow you to invest with $500 or less.  If you just can’t come up with $500 to start your portfolio, many funds would allow you to skip that hefty initial lump sum investment if you sign up for automatic monthly withdrawals ranging from $25 to $50 from your checking account.  Experts also recommend starting on stock mutual funds instead of stocks in individual companies.  A well-chose mutual fund is less risky because it invests in many companies, thus spreading out the risk.  Unlike in stocks where when the company does poorly, so is your money.

Know your priorities – Choosing which investments to commit should be according to what you want in the long-term.  Do you plan on buying your own house?  Pay college education?  Save money on your retirement?  Choosing an investment depends on the amount of time available before you need the money.  For instance, stocks are considered long-term investments, and it is best to plan on holding stocks or stock mutual funds for at least five years to receive its optimal returns.  If you need money sooner than this, you may want to sell your stocks when share prices are down.

Determine your risk tolerance – Another factor you need to determine is how much uncertainty you can handle in regards to a negative change in the value of your portfolio, especially if the prices start falling down just as you begin your investment.  If you hide your money under the pillow simply because you don’t trust the bank, then you are most likely feel uncomfortable investing in stocks in the first place.

Spread your investments – Most experts recommend investing on several different types of investments to reduce risks.  Buy stocks from different companies, for instance, then you can add some mutual bonds on your portfolio as well.  Basically, not all investments would work well, as seen in how returns on stocks and mutual funds are high while returns on bonds are low, and vice versa.  Tailor your portfolio according to your risk tolerance and the number of years before you need to withdraw the money from your investments.