The beginner’s guide to investing
Investments can help you improve your financial security — if you know how to play your cards right.
So it’s important to understand that investing has become more accessible, as the BBC notes that recently millions of new accounts have opened with online brokerage platforms.
New traders are certainly optimistic about getting supplemental income streams, but experts are warning that inexperienced investors must study the risks and principles behind investing to avoid any costly mistakes down the line.
So if investing has piqued your interest, then you’re in luck. Below, we’ve prepared a guide where you can learn the basics of investing.
Is investing right for you?
Investing should depend on your financial goals and capabilities, and not on your desire to get rich quick. Think about your goals when planning your time horizon, which is your timeline between buying and selling an asset. Young adults that are planning for their retirement have a longer time horizon, so they can afford to take risks. But if you need that return for a wedding in two years, you need to stay on the safer side to earn profits.
So before you say yes to that investment product, consider how your potential profit compares with its risks. If you believe that it can still help you get to your financial goal by your deadline, you have the green light.
How can you get started with investing?
Now that you’ve considered the pros and cons, it’s time to take the first step. Here are the following major decisions that you need to make as a new trader:
Pick your investment platform
An investment platform is like a shop where you can purchase various trading products. As a beginner, it’s crucial to find a platform that has good customer service, in case you need to troubleshoot any issues. Next, look into their fees and gauge whether you can afford them in the long run. Finally, consider the investment products that they offer and check if they align with your preferences.
Choose your investment product/s
There are many investment products out there, but you need to consider their stability in the market and whether they can provide a good return on your investment. Forex or currency trading is the largest market in the world, and FXCM points out that this is due to its convenience and efficiency. Frequent travellers may notice that the exchange rate for the GBP may increase over the course of a week. Recognising this potential, the forex market allows traders to earn from these efficient currency hikes anytime and anywhere they may be.
Another stable option, as Samuel Leeds of Property Investors suggests, is real estate. Leeds recommends looking far and wide, because your capital can be further appreciated in areas where property prices are trending upwards. However, real estate can be pretty high-maintenance. Our very own Cyrus Bailey suggests that 70,000 homes across the country have a high risk of getting flooded. A property’s susceptibility to natural events like flooding and weather damage can destroy its beauty and depreciate its value, so be sure to do your due diligence before making the investment.
How can you invest safely?
Each investment comes with its own risks, but you can avoid major losses by being smart about your money. Juliet Schooling Latter from Chelsea Financial Services recommends investing small amounts regularly, rather than making one big payment. Through this strategy, you can avoid losing lump sums during market crashes. Meanwhile, Rachel Winter from stockbroker Killik & Co. states that while stocks fluctuate all the time, you can minimise your losses by investing in long-term products and by paying attention to investment fees.
Start slow, end big
Investing can help you reach your financial goals by increasing your money’s value over time. Given that new investors are prone to making mistakes, experts encourage you to consider investment platforms, products, and strategies that align with your capabilities and goals. And above all else: make sure you research, research, and do even more research!