Investing for Beginners: Tips to Get Started
The definition of investment is the purchase of assets with the idea that their value will increase over time. People are afraid to invest for many reasons, a few to name are because they don’t understand what stock market is or how it works, they are afraid that they lose money instead of gaining more. All those fears are understandable. There are numerous cases in the history of finance when fortunes were made and fortunes were lost. One of the most famous people of the near past that had to go through this misfortune was the writer Mark Twain. After his investment in a publishing firm failed him, he had to file for bankruptcy. Very few people know that the 16th US President, Abraham Lincoln, also went bankrupt twice.
Fear must not stop you from investing. Instead of being afraid, an investor should develop caution when choosing where to invest. It is a good thing to have money in the bank, but it is much wiser to have money that works for you and don’t just sit around in your bank account.
CREATE AN INVESTMENT BUDGET
This is one of the most common misconceptions about investing – you need to invest a lot in order to gain a lot. While it is true that the more you invest, the bigger your gains could be, the opposite is also true – the more you invest the bigger your losses could be. If you are new to investing, it is a good idea to create an investment budget. Start small. Even $100 or $500 could be enough to get the feel of investing. Think about it as practice before entering the bigger market.
READ THE NEWS
It is absolutely necessary to follow the news if you decide to invest. As we said, investing in the purchase of assets with the hope that their value will increase over time. If you don’t know what assets are expected to increase their value, how would you know where to invest? A common mistake is to invest in stocks of a company that you have never heard of, but a friend has told you that they will be profitable companies soon. Rumors, if not covered by provable facts, can lead to failure.
Let us examine the automakers market. If you have been following the news, you would know that all car makers are switching to the development of electric cars and within 10 years petrol and diesel cars will be banned across Europe. You should keep that in mind when investing in car companies – invest only in those that have planned to switch to the manufacturing of EVs only.
If you only plan to invest a small amount of money, diversifying your portfolio might not be an option. However, it is wise to consider diversification if you have bigger investment opportunities. The reason behind the idea of diversification is quite simple – if one of your investment fails, you won’t lose all your money. On the other hand, if one investment fails and another doubles or triples, that might cover the money lost.
CHOOSE YOUR BROKER WISELY
If, for example, you have decided to invest in the NASDAQ100 or the NASDAQ Composite index, you will need to do this with the help of a broker. If you don’t know what those two indexes are, you should do your research ahead of time. In two words, we can just say that the NASDAQ100 index consists of the one hundred largest non-financial companies listed on the NASDAQ Exchange, and the NASDAQ Composite Index includes all companies listed on the NASDAQ Exchange. If you have never traded before, it is wise to get the help of a broker. A note to add here is that not all brokers have access to NASDAQ so be sure to check if this is true with the broker that you have chosen.
No matter whether you want to invest in the NASDAQ or other publicly traded companies, it is a good idea to enter the investment world with the help of a broker. While you will have to pay a fee for his services, you will also have more possibilities for investment. Brokers that have been trading for a long time have connections; they know the market better than you and have an insight on how the investments might unfold. If you are hesitant about paying a fee to a broker, you can also look into the discount brokers that will require smaller fees for their services.
If you live outside the USA and you would like to invest in the US market, there are a couple of companies that will help you with that. One of those companies to mention is FirstTrade. There are also other companies like eToro and the Charles Schwab Corporation that will also allow you to open an account and trade on the US market.