Investing for Beginners - Top Tips
If you would look for the very definition of investing, you would probably stumble on some answer that would sound similar to this - “Investing is a process of spending money while buying assets which have the largest potential for returns.” Now, this may sound very simple on paper, but the real-life investing is everything but that. That being said, do not let the absence of some kind of all-applicable magical investing formula discourage you from ever trying. There are a number of ways to level the investing playing field and minimize the luck factor as much as possible. Let us look at some of them.
Be Very Careful and Patient
Fortune does not occur over the night. Well, at least if you are not gambling, and that is the very poison we want to eliminate from your investing habits. Until you get an opportunity to make your big score, you may already be broke. So, asses the funds you have on disposal, do not throw them away at once on some shady stocks, and always save enough to bridge some potentially difficult periods. It is a slower route, but much safer one.
Put the Things into Perspective
The value of some stock is not carved in stone and something that is on its way down can easily pick itself up again. That is why we should resist from making some sudden and potentially harmful moves when things do not bode well for us. As a matter of fact, buying a stock whose price seems irrationally depressed (value investing), is as legit as buying stocks with a better momentum. Sometimes, turnaround may take some time to happen, but when it occurs, it delivers.
Start With the Things You Are Familiar With
Until you familiarize yourself with stocks, you should probably stick with the things you are familiar outside the market. That does not mean that you should spend your money on Apple (but do not think even for a second that any company is out of your league). You can go with some smaller brands you know are doing well from your personal experience. Once you get a stronger grip on the market you will be ready to branch a bit.
Do Not Gamble Everything on One Card
Or in the more appropriate language, diversify your investments. No matter how some stocks may be going well, everything can change over the course of the night. If you do not have a backup plan, your career as an investor will soon be over. That is why you should do your best to couple your bigger and riskier moves with a lot of smaller and safer bets (investing in penny stocks, for example). More ground you cover, safer you will be.
Pick the Right Broker
This is one of the most important decisions you will ever have to make as an investor, because the choice of a broker will determine what type of investments you will have access to, how much you will pay in fees, and what your eventual returns will be. The best long-term solution is to pick a discount-broker who will not charge you huge amounts in fees.
Although some would compare the stock market to a huge casino where everything is a gamble, we beg to differ. Investing becomes a gamble only when you introduce more uncertainties than there already are. Follow these five rules and you will do exactly the opposite. While reducing the risk does not automatically guarantee success, it raises your chances significantly.
