Last Updated on Jul 30, 2020 by James W
Investing used to be something that was out of reach for most of us. But it’s now possible to use websites and online portfolios to buy, sell and manage your investments. Here’s how you can get started.
Choose Your Investment Wisely
There are so many different types of investments out there. Putting your money in a bank is a type of investment. It’s a very low-risk and low-return form of investment. The only way your investment can backfire is if the bank goes bust. But if you’re reading this, you probably want to invest in a different way than that. The most common form of investment is investing in stocks and shares, so this is a good place to start.
That’s not the only type of investment for you to consider though. Investing in gold and silver coins is something that can be good when you’re starting out. Or you could buy homes, renovate them and rent them out. The buy to let market is very buoyant at the moment, so there’s lots of money to be made there. Other types of investment include foreign currency trading and antique dealing.
Decide How Much Time You Want to Dedicate to Investing
There are lots of different types of investor. There are the people who play the market as their sole job. But this probably isn’t what you, as a beginner, will be doing. You should think about how much time and effort you want to dedicate to the investments you make. If you want to make lots of investments, you need the time to look after them. If you’re only a hobbyist investor, make fewer investments so that you can devote as much attention to them as is necessary.
You also need to think about why you want to invest. Some people invest in order to improve their pension pot, and others want to get a bit more out of their savings. If you’re a long-term investor, you should focus on less risky, long-term investments. It’s all about being sensible. But if you want money a little quicker, you’ll have to take more risks because this is the only way to see big returns fast.
Don’t Put All Your Eggs in One Basket
Putting all your money into shares in one company is a recipe for disaster. This is not the smart way to invest, so don’t be tempted to do it. Imagine what will happen to your money if that company sinks, and you’ve put all your money into it. You’ll be left with nothing, and the whole effort will have been a waste of time. Of course, it’s possible that the investment will turn out well, but it’s still too much of a risk to take for beginners.
Instead, you need to spread your investments over different stocks and companies. This means that even if one of the company sees a sharp fall in share price, you’ll be able to carry on. There’s a much smaller chance of all your investments falling in price. Some of the markets will fall, but others will rise. That’s the way in which the market functions, so it would be very foolish to put all your eggs in one basket.
Balance Caution with Risk
The two key things about investing are caution and risk. Of course, investing is inherently risky, and there’s no getting away from that. But those risks can be careful, calculated risks rather than silly, unresearched risks. The key is balancing risk with caution. On the one hand, you don’t want to make so many risks that you sink all your investments. This will end your foray into the world of investment very quickly and very abruptly.
But on the other hand, being over-cautious can lead to disaster as well. Being too conservative and cautious can be reckless. You’ll miss out on a lot of great investment chances if you refuse to take a few risks here and there. No one who has ever found success on the stock markets without taking risks; it’s simply not possible. If you’re someone who doesn’t like taking risks, then you should ask yourself whether investing is the right move for you.
Consider Using a Fund Manager
Sometimes, having a little help when you’re a first-time investor can make a big difference. If you’re nervous or unsure about how to invest, using a fund manager to help you might be a very smart move indeed. Firstly, I’ll explain what it means to invest through a fund. This is different from investing directly because you invest collectively, and you don’t have to make as many big decisions. This isn’t necessarily a good way of investing for everyone, but it can be good for beginners finding their feet.
The fund manager is the person who buys and sells stocks and shares on your behalf. They will have experience of playing the stock market, so they’ll know the right tricks to pull and when to pull them. Whereas someone like you, with no experience, will have a problem knowing what to do. Some people like the experience of making their own investments (and their own mistakes), but it’s something to consider.
Make Incremental Investments
It’s hard to decide when the right time to invest is. The market changes all the time, so don’t worry too much about when you start investing. What you need to worry about more is how you invest once you’ve started. It’s not a good idea to invest large sums of money. This is the riskiest possible approach to take. It’s not that putting lots of money into stocks is a bad idea as such. But putting large sums into stocks in one go is a bad idea because you’re not spreading your risk properly.
The best thing to do is invest incrementally. This improves your chances of maximising your potential returns on the investments you make. You buy fewer shares when the price is rising, and then you can buy more when the price dips. This is a clever way to invest because you get value for money more you do by using other methods of investment.
