Finance

Investing for beginners: where to start and how to keep going

Investing for beginners

It is hard to take the first step into the world of entrepreneurship, but it is necessary if you don’t want to work for hire, where you might have a decent, stable income, but you always work “for someone”. And this doesn’t suit everyone.

The main thing is to overcome fear

When talking about where to start in the world of investing, any accomplished businessman will most likely tell you: there is no one-and-only universal “model of success”. However, the very first step is well-known, very important and very difficult: to overcome fear and to make investments, realizing that you can fail to earn immediately the sum promised by all sorts of ads on the internet.

Yes, many people do not dare to take risks because of fear. Others say that they do not have enough starting capital and admit their lack of knowledge about investing. However, any financial expert would say that even $100 may be enough for getting started.

As for “incompetence”, this problem is fixable. Experienced investors who are aware of the price of risk in the financial world know that there is one golden rule. Beginners as well as professionals should not invest in those sectors of the financial world that they have little knowledge of. Therefore, after you have decided that it’s time to try investing, you need to study the topic. For example, if you have a personal financial consultant, listen to him, and then try to collect as much information as possible about the area of ​​investment you are interested in.

The questions that you should ask yourself and the financial adviser at this stage are as follows. How risky is the area in which you are interested in investing? What amount can be lost, under what circumstances and for what reason? Will the income be regular, and how big could the sums be that you have to invest additionally – say, monthly?

Of course, you should definitely read books on investing, which describe the experience of accomplished investors and how they got started. Undoubtedly, you need to find video lectures and courses on the internet in order to figure out how best to start – and find the “financial path” that is easy and safe to follow. These are not general phrases, but the most important rules written by experienced people. First of all, explore the world where you want to operate and earn!

Investments first – profits afterwards

After you have completed the necessary educational program, you need to set a goal – where you want to invest, develop a strategy, draw up a plan, and finally, choose an instrument.

However, before you fetch the “forgotten” 100 dollars out of your pocket, you must understand that the money should really be “forgotten”. Any specialist will tell you a smart phrase: the basis of investment is available funds. Yes, of course, you can take a big chance by investing all the money you have at the moment, but this is not usually the right thing to do. Regardless of how much you earn (and it is important that you have a stable income – at least an average one), usually people invest around 10% of their income. And after the process has already been launched, every month you need to add about the same amount – 10% – into the system you’ve joined.

Professionals of the financial world will give you more advice. One of these: you need to constantly increase your level of investment literacy in order to become more savvy, in order to minimize the risk of losses. And you should be psychologically prepared for the situation that in the beginning you will only invest 10% every month, and only afterwards you will earn and even save up money.

In the world of investing, you need to have a “safety cushion”: in the amount of at least 4-6 monthly salaries. This amount may be deposited, but in such a way that you always, in case of any unforeseen situation, could withdraw a part of it from the account.

Another important rule. If you decide to invest, first try to reduce your debt. It is considered normal when about 40% of income goes towards covering all loans per person per month. After all, anything can happen, and there is no investment with zero risk. Experienced financiers will tell you something like this: if you tremble all the time over your money, you won’t be able to get a significant profit, because you will be afraid to try something new and you won’t get a feeling of the trends in the market. Another rule: money does not rule you, it is you who rules money, otherwise it is impossible to build wealth.

Stocks and currencies – not the best start

So, where to invest? For starters, you can try investing in securities without risk and for free. This is done using a so-called demo account. At the moment many financial institutions offer a trial account using virtual “training money”. The interface is like that of a real account. Many beginners to investing practice this way – before they start dealing with real money.

And when you are ready to take a step into the real world of investing, estimate the following. You can try to invest in shares of various companies, but professional financiers don’t recommend this. Yes, some brokers open accounts to buy stocks, starting with small sums. However, it does not make much sense to go to the stock market with starting capital of less than $1,500. It should be “long money”: in the foreseeable future you will not need to withdraw it.

It is important to understand that there is no ideal type of investment. Maybe you could try investing in the currency market? On the one hand, one can start there with very small amounts, and in this system earnings are easy. But on the other hand, there is a big risk of losing money. For some reason, there is a common misconception that currency trading is suitable for beginners. Some go to the Forex exchange, but suddenly – quite unexpectedly – begin to lose one chunk of change after another. In fact, few people make their first investments in the world of futures and options, and this is quite reasonable.

Where to invest with minimal risk

If you are not quite ready yet, then find an experienced and honest consultant who will help you create a well-balanced “investment portfolio”, where there will be bonds, unit investment funds, PAMM accounts and, possibly, some small shares “for a complete set.” Then, without too much headache and without serious financial losses, you can provide yourself with a fairly good income for a sufficiently long period of time.

In general, it is believed that, in Russia for example, it is better to start with the minimum capital in mutual funds and PAMM: money starts working there immediately, although not very briskly, but the risk of losing it is minimal. When you have sufficient sums, you can try to earn on a percentage of deposits in banks. Here the main rule is: do not put all the money in one account in one currency and in one bank.

Also, when you have a decent amount available, you can try to make starting investments in the real estate market. But, if you are an amateur player in the real estate market, and even more so when you are only starting out in the world of investing, do not invest large sums, since this area is quite risky.

After all, why is the balanced “investment portfolio” mentioned above, in which real estate is only one investment area, so important? It is needed to balance the risks. In this “portfolio”, some options can cause loss, while the profit from the rest of the investments will compensate the “minus”, or even lead to a “plus”. Some investments will be short-term in this “portfolio”, others will be long-lasting. And often it happens that the profits from short-term investments can then become a good start (or continuation, as additional investments) for a further journey into the financial world. The main thing in this world: on the one hand – not to be afraid, on the other – to be aware of every step you are taking.

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