Investing is not for the weak-hearted. In fact, so many shy away from serious and active investing because they’re afraid it’s too complicated and challenging. But here’s a newsflash: investing is really not that hard. You don’t need a degree in finance, extensive knowledge of math and a high IQ to have profitable investments. If you can make it through fifth-grade math, then you can do investment. Literally, everyone has the brainpower to follow the stock market. All you need is a willingness and eagerness to learn. If you’re patient and non-impulsive, the better.
So you want to begin and develop your own investment portfolio. But how do you start? You’ve already done your research and know the basics. The next step is to make your investing decisions. We’ve interviewed industry experts and compiled a list of all the best investing tips for absolute beginners.
Tip # 1 Establish Your Long Term Goals
Before investing, it’s important you consider your purpose and the time you would want your investment to be returned to you. Why do you want to invest your money in the stock market? Do you want your cash back in a year? Or five? Are you saving for your retirement? Or maybe your college fund or future home?
Different investment types suit your different needs. So it’s critical that before you put your money anywhere, you know the direction your investment is going to take.
Tip# 2. Set Your Capital
After doing your research and establishing your long-term investing goals, it’s time to decide how much you’re willing to spend. Of course, you will need to set your capital so you can calculate how much you should put on investing and what kind of return on your investment is required in order to produce your long-term goals. You can use various software and calculators to help you with these numbers. Most, if not all of the investment companies have their own investment calculators.
Tip#3. Know Your Risk Tolerance
When it comes to investment, intelligence can only get you so far. There’s this psychological trait called “risk tolerance” that affects your decision-making as well. Understanding how you’re going to react to stressful decisions when it comes to risk is essential when you’re investing your money. For example, if your risk tolerance is low, you should stick to low-risk investments. These investments do not necessarily make you a millionaire overnight, but they are much better for your sanity. If you are a bit of a daredevil, then you’ll be able to handle high-risk investments relatively well.
Tip #4. Know How To Control Your Emotions
Aside from knowing your risk tolerance, it’s also a great thing if you know how to rein your emotions in. In a way, investing is a form of calculated and educated gambling. There are certain things that will happen which are not entirely in your control. The most significant setback you can have is your inability to control your emotions. Not only will this not be good for your mental health, but will also affect how you react when difficult decisions need to be made. In investing, you need to remain calm and reasonable.
Tip #5. Educate Yourself With The Basics
The worst thing you can do is invest when you don’t know anything about it. It is critical that you first learn investment basics. The world of finance is filled with complicated jargons, and terms that can be complicated if you don’t learn about them first. Ensure that you educate yourself with financial metrics, methods of stock selections, timing, stock market order types, and the different types of investment accounts available.
For the more ambitious person, investment still remains the most attractive option to grow your personal wealth. And it’s no wonder. Studies show that there is indeed a significant return on investment that other personal wealth management methods offer. And the earlier you start your own investment plan, the more secure you’ll feel about your future.