Contrary to popular belief, you donโt need to be an expert or particularly wealthy to start Investing. In fact, getting started may be easier than you think.
If your financial goal is over five years away, it may be time to consider putting some of your money into investments. By doing so, you can make your money grow further and keep up with rising prices.
Before you begin investing, itโs important to understand that all investments carry a certain degree of risk and itโs crucial that you know the exact risks involved. Thereโs no denying that the world of investing can be confusing for beginners, however thatโs why weโre here to help.
In this guide, we will be covering the basics of investments along with some essential investing tips to help you get started.
Letโs begin!
What Is Investing?
Investing is the practice of buying or putting your money into something with the aim of receiving a profitable return.
When you invest, you are buying something you believe will increase in value over time. Investing typically involves assets such as shares, funds or bonds.
You need to remember that there are no guarantees with investing, which means there is always a chance that you could get back less than you invest. However, there is also the potential for your money to grow โ thatโs why people do it after all!
When Should You Start Investing?
You can start investing at any time you want to, however, there are a few criteria you need to fulfil before you begin.
Before investing, it is a good idea to save a certain amount of money. This is your emergency fund and typically needs to cover three to six monthsโ worth of living expenses. An emergency fund will give much peace of mind that you have money to fall back on in case of the unexpected, without needing to dip into your investment fund.
Next, ensure that youโve paid off expensive consumer debts such as bad credit payday loans, credit cards, etc. It makes sense to pay off all debt where you are being charged high interest before you begin investing.
If youโve met these two criteria and have plenty of money in your savings account and want to see it grow, consider investing some of it. Choosing the right investment for yourself may depend on various factors such as your life circumstances, financial situation and future goals.
As a beginner, start small when trying to dip your toes into the realm of investment. You can then watch what happens and invest more later on if you desire.
3 Common Ways To Invest
1) Shares
When you buy a share, you are essentially buying a small stake in a company. Many companies sell shares to raise money, which they then use to grow their business. As an investor (or shareholder), you are then free to buy and sell some of or all your shares on the stock market at any time.
If the company youโve chosen to invest in performs well, the demand for its shares will increase along with its share price. Similarly, if the company performs poorly, the share price will drop. It is important to remember that interest rates and the wider economy can also impact share prices. This makes the stock market slightly more volatile than the following options.
2) Funds
When you invest in funds, you are essentially buying a mix of investments such as shares, bonds or other securities to avoid putting all your eggs in one basket.
With funds, if some of your investments perform poorly over a certain period, there is always the chance that others may perform well. Investing in funds allows you to access a diversified portfolio with potentially lower risks, which can be helpful if you are just starting out with investments.
3) Bonds
In simple works, Bonds are simply debt obligations of entities such as governments and other corporations towards the owner of the bond. By buying a bond, you hold a share of an entityโs debt and will receive periodic interest payments along with the bondโs face value when it matures. This makes bonds the safest investing options out of the 3 we just spoke about.
Investing Tips for Beginners
1) Consider Investing As Soon as You Can
The earlier you start, the sooner your money can grow. Delaying your investment journey could lead to missing out on positive growth which is not ideal if you want to maximise profits. Thatโs why you ought to consider joining the investment world as soon as you can.
2) Diversify Your Portfolio
Regardless of your investment style, itโs always a smart idea to try and mitigate your investment risks. If you wish to limit potential losses, consider diversifying your portfolio by spreading your money across various types of investments and regions.
3) Think About the Long-Term
Many do not like to wait for results and patience is becoming rarer every day. However, if youโre serious about investing and want to maximise your potential profits, you will need to practise patience, thinking about the long-term benefits and potential consequences.
To Sum Up
The world of investments can feel daunting to those who are unfamiliar with it. However, by keeping the above information and tips in mind, you are well-equipped with the knowledge you need to get started on your journey.
Investing is a long-term game and you will need to monitor and review your investments regularly to ensure they remain profitable.
It is essential to remember that investments are likely to fall as well as rise at any time. As such, you neednโt worry about any short-term fluctuations and focus on your long-term goals.
