Here is what you could know if you wish to begin investing
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As stocks continue to hit record highs, you might consider investing.
Since the outbreak of the Covid-19 pandemic, investors in stocks and alternative investments such as cryptocurrencies have increased. According to a Charles Schwab analysis of 500 investors, 15% of current private investors started playing on the stock market in 2020.
It’s easy to get caught up in the excitement. The S&P 500 rose more than 14% in the first half of 2021. Then there’s the hype about meme stocks like AMC, which hit an all-time high in June, and GameStop, which rose earlier this year.
However, experts warn against following the crowd blindly.
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For investment legend Charles Ellis, author of Winning the Loser’s Game, the key to investing is simplicity.
“Most of us make way too many decisions about investing,” he told CNBC employee Jenny Harrington in an interview for CNBC Pro. (Harrington is the CEO of Gilman Hill Asset Management, based in New Canaan, Connecticut.)
“Fewer instructions work better,” added Ellis, a proponent of passive investing like index funds versus active investing. “Fewer decisions work better.”
Some new investors are looking for quick trades or trying to time the market. Starting slowly and understanding the importance of diversification and asset classes is what certified financial planner Crystal Alford-Cooper wants to impress with her clients.
“This is the age of distraction,” said Alford-Cooper, vice president of planning for Glen Echo, Law & Associates, based in Maryland. “In your mind, you need to stay away from the noise and stay focused and disciplined about the things that you can control.”
How do i start?
For those just getting into the stock market, Ellis recommends starting with the basics.
“It’s a bit like, ‘How do you start eating ice cream?'” Said Ellis, founder and former managing partner of Greenwich Associates. “You start eating vanilla and plain vanilla would be either the total market index or the Standard and Poor’s 500 index, which is a very significant part of the total market.”
Gilman Hill Asset Management’s Harrington agrees.
“As with most things in life, you won’t be an expert on day one, and with around 7,000 ETFs and 3,500 stocks publicly traded in the US, making a choice can be overwhelming,” she said.