Invest better in 4 simple steps

The Motley Fool has been helping ordinary people become better investors for nearly two decades.

This month, we’re reaching out to millions of investors to help guide them in their quest toward financial knowledge and independence.

During the last few weeks, we’ve looked at several different aspects of investing, ranging from making your cash work harder for you to getting acquainted with some of the stocks and funds that give you lucrative opportunities to profit in the long run.

Yet when you take a step back from all those specific investments, you need a unified financial strategy to guide you in choosing among them and allocating your money appropriately. Although experienced investors often follow complex strategies, starting out simple is always helpful. So with that in mind, here’s a four-step plan you can follow to get your finances in order and get on the road to prosperity and financial security.

Step 1: Get out of the red.
Lots of beginning investors often want to dive into stocks right away. But if you’ve got balances on high-interest credit cards or other costly debt, use most of your spare cash to get it paid down.

Granted, there are occasions when it would be smarter to invest than to pay off debt. But usually, you’ll end up better off saving yourself interest charges of 15% to 20% or more.

Step 2: Build a cash cushion.
Even once you’re out of debt, you want to make sure you stay that way. Having an emergency fund to cover unexpected expenses is a big step toward protecting yourself from a financial catastrophe that can undo all your progress in fighting your debt. Most experts advise three to six months’ worth of expenses to help you weather a layoff, but even having just a few hundred dollars can prevent you from having to go back into debt to cover a car repair or a broken water pipe.

Step 3: Build a core portfolio.
Some investors feel comfortable starting with individual stocks and never look back. But for most beginners, funds and ETFs are an easier, less scary place to start.

In particular, low-cost index funds and ETFs make it simple to get broad market exposure in a variety of different types of investments. Target retirement funds even combine different investments in a single fund, automatically changing their allocation among stocks, bonds, and cash as you get older to make their overall portfolio more conservative. Whether you go that route or choose to build your own mix of funds and ETFs, following simple asset allocation methods to build a core portfolio is a great way to start.

Step 4: Pepper in some stock picks.
Once you have core holdings established, it’s easier to take the greater risk of making specialised investment plays. You may pick individual stocks, or you might prefer to use sector ETFs or other niche investments to capture returns from a group of stocks. As you gain confidence, you can devote more of your money toward this part of your portfolio, leaving your core untouched to grow more conservatively.

Get started today
Whether you’ve never thought of investing before or have been trying to get up the nerve to start for years, now’s the perfect time to take action.

If you’re in the market for some high yielding ASX shares, look no further than our “Secure Your Future with 3 Rock-Solid Dividend Stocks” report. In this free report, we’ve put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

 More reading

The Motley Fools purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

A version of this article, written by Dan Caplinger, originally appeared on

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!