Smart investing is something you pretty much have to learn if you want to be a rich person today and in the future.
Today, I want to share with you basic investing tips that every beginner should know.
These won’t be ground breaking out of the box tips. These are the basic building blocks of investing tips.
If you’re new to the world of investing money, then this should be a phenomenal blog post for you.
1. Get An Education First
Investing money is not something a newbie should dive head first in. You at the very minimum need to read a few beginner investing books or take a few introduction to investing courses. Nothing fancy or crazy, just get the basics down so you know how to do things like evaluate if a stock is overvalued or understand how to read a stock table. These things matter a lot. I’d also recommend reading investing blogs or downloading apps that can help you learn a little bit about what the market is doing every day. Even if you hand your money to a financial advisor to take care of all of it for you, you should still know what’s going on – because ultimately, you are responsible for your money and financial future no matter how you look at it.
2. Get Financial Advice
If you’re new to whatever you’re doing, it’s usually better to get advice then to go about it on your own when it comes to money. Because the last thing you want to do is lose a big ton of money by making silly mistakes. As you learn and get better and smarter at investing, then yea, give yourself more room to take some calculated and smart risks. But for now, talk to friends and family who’s been there and done that. Talk to a financial advisor. Ask questions and discuss things with people on finance and retirement forums. Everyone’s got something to say and not all of them will be right. But at the very least, you will expand your mind and become a smarter investor.
3. Don’t Invest Any Money You Can’t Afford To Lose
Only invest the extra money you have. If you begin to invest money that you need to pay bills and groceries, what’s going to happen if you lose that money and can’t pay your monthly car insurance bill? You’re going to be in a heap of trouble, that’s what. Never over invest. To take it a little further, if you are more conservative, you should only invest money you are willing to lose. If you lose the money, you shouldn’t be losing sleep over it. Sure it may be a little upsetting, but it shouldn’t keep you up at night or ruin more than a few hours of your day. If your investing habits are causing you to suffer health wise, then you need to rethink your investing strategy. Your health is more important than money.
4. Invest In Things You’re Familiar With
This blog post is about investing money, but truly, an investment is an investment. Doesn’t matter if it’s money or any other type of asset. If you are familiar with a certain way of growing money, then you should stick with it if it’s a viable option. It goes the same with stocks. If you are very family with the telecommunication industry, because you work in it daily, then you have more insights in it than your average person. If you can see the industry booming because you can see first hand that the need for telecommunications has been rising, then you would probably want to act on that.
5. Start Investing Right Now
The thing about investing money wisely is that it grows exponentially. That means that your money you invest today can be worth 1000x more decades later. This is because money compounds over time, and if you started saving money in your early 20’s, and finally took it out when you’re ready to retire at 65, you can very well have millions of dollars in retirement – even though you only put in tens of thousands of dollars of your own actual money. The younger you start the better. Which is why you want to start investing now.
6. Set A Goal And Proper Expectations
Decide how much money you want and by when, and calculate with reasonable numbers what it takes to get there. For example, investing $1000 and expecting to make $100,000 from it in 5 years is a bit unreasonable for the beginner investor. Not saying it never happens, or can’t happen, but it’s not a common thing to happen for beginners, and isn’t something you should reasonably expect. Investing $1000 and making $300 from it every year is a very reasonable expectation, and this is the type of math you want to do to determine how much money you want to make in the long run. If you wanted $1,000,000 for retirement, then it will give you an idea of how risky you need to be and how much money you need to invest in order to reach that goal.
7. Invest For The Long Run
You don’t get into investing money and then leave 5 years later expecting a big pay day. Investing money for big time growth takes time. Lots of years and compounding. Be prepared to stay in the game for a long long time. Until at least the day you retire at a minimum. You’ll learn a lot of things along the way that will make you a smarter investor. You will make a ton of mistakes, but if you’re smart, you will also learn from those mistakes and do it better next time. Now, investing for the long run doesn’t necessarily mean buy and hold a stock forever. It just means that this is a long term game and you need to be prepared to play it for a very very long time.
8. Diversify Your Investments
You’ve probably heard this one a million times, but it’s one of the safest ways to safeguard your investment. But funny enough, people still don’t do it. I think Warren Buffet once said that diversification is for people who don’t know what they are doing. I believe it was him. I can see what he is saying there. If you know what stocks are going to rise and fall, then you don’t need to diversify, do you… you would just pick up the rising stocks, sell the losers as well as short your position. But we’re not all Warren Buffet, and to be honest, he doesn’t get it right every time either. You want to buy many types of investments and go into many different industries so when one type of investment/industry or whatever falls flat on its face, your overall investments won’t take too big of a hit. Well… that’s the hope anyway. Nothing is every guaranteed in life.
9. Be Riskier While You’re Younger
When you’re younger, you should think about being riskier with your investments. This is because a couple of things. First, you have more years for growth, and you can take on a riskier positions to make even more money in the long run. And also, if you were happen to take a big loss, you have more years to recover from it. Someone who is 45 years old and investing for the first time doesn’t have the luxury of taking a ton of big losses, because they don’t have the same time for recover like a 20 year old does. This doesn’t mean go crazy with risk. But it does mean you should consider getting closer to the edge of investments that make you a little uncomfortable investing in, but could yield big returns if you get it right.
10. Keep The Losses Small
Something I learned when I started a business a long time ago was to never have any big losses, or keep them a at minimal. This is because life is full of big losses, small losses, small wins, and big wins. If you get rid of the big losses, and the small wins and small losses cancels out, then you’re just left with big wins. And big wins in investing is money in the bank.
11. Don’t Be Unnecessarily Risky
I think something newbies do all the time when they start is they have a tendency to be unnecessarily risky. Maybe this is because they don’t know what they are doing and don’t fully understand the risks they are taking, or they are just young and tend to make riskier decisions. Either way you put it, don’t be that person. Have self control and discipline. Make smart calculated moves. Don’t overextend and try to be a hero. Making money in the stocks market isn’t about being a hero who hits home runs all the time. It’s more about learning how to earn a steady return over time that you’re happy with. You might be the type of person who is constantly trying to beat the market, or you may be happy with the market average and just want a reasonable return. Either way, don’t take on more risk you are willing to stomach… because this is the stock market, and if you keep doing it, you’ll get burned eventually.
12. Buy Low Sell High
Duh! But still…. people don’t do this! They buy stocks, it comes crashing down for weeks, and then they sell. Well… they’ve just done the opposite of buying low and selling high. Now, sometimes getting out of a position is the right thing to do. And you need to make the tough call of selling low. As long as you are doing your due diligence and making sure this is the right call, then absolutely. But the game is to get in when it’s low and get out when it’s high. If you can master this, you will be a rich rich person.
13. Don’t Make Emotional Decisions
We are humans and we are ruled by emotions. But don’t let that get in the way of you investing decisions. I think beginners are even more susceptible to making knee jerking reactions because they don’t have the experience of “been there done that” like a experienced investor has. You want to make sure all your decisions are based on solid researched information. A lot of people panic when their stocks are plummeting and they can’t stomach the losses so they just sell. Sometimes it’s the right decision, but sometimes it’s the wrong decision. Try not to let your emotions rule these decisions. Do your homework and then decided logically if it’s right to sell.
14. Be Willing To Sell When It’s High
You need to be willing to sell your stock if it’s high. Of course, you don’t know if it will keep rising or fall. But it will eventually fall down some day. No stock rises forever. Yes, if every stock investor knew when the best time was to sell and rake in the profits, then they’d all be rich. But this isn’t the case obviously, and the stock market couldn’t even exist if that happened, but anyway, don’t fall in love with your stocks. Make logical decisions with them. If it really feels like it’s time to sell and take profit, then you should do just that.
15. Investing Is For Everyone
Keeping your cash in a savings account is not the right way to grow money. Actually, you are losing money every day because inflation is eating away at your savings. Investing is something everyone should learn how to do even if you’re just a stay at home mom or a pharmacist who can’t even file her own taxes. it’s your money and your retirement. Nobody will take care of it as well as you will, because this is YOUR financial future we’re talking about. So get a few beginner investing books or courses and start learning something new every day. Or practice stock trading here.
16. Invest Regularly
It’s usually not enough to invest money a few times a year and leave it and see what happens. I mean, you might get lucky and hit a home run. But the long term outlook of this strategy is probably not going to be that great. At best, you’ll probably get mediocre results. Investing is something you’ll want to be mindful of and do daily if possible. It doesn’t mean you need to put money into a stock or mutual fund every day. It just means you will want to be doing something every day that will help you become a better investor. That could be watching Bloomberg TV or reading the papers, or practicing stock trading on a simulation app, or reading forums about investing in growth funds. Overall though, you’ll want to be active in managing your investments. I don’t think putting it in somewhere and letting it do its thing is the best strategy by a long shot. Things change in the investing world, and you need to be there to make a decision when it does.
17. Investing Isn’t Gambling
People often compare investing to gambling. There are some similarities. But really, they’re not the same thing. You see, gambling is literally rolling a dice or spinning a wheel. Your fortune is based 100% on luck. And the Casino is against you so you’re going to lose in the long run. The odds say so. But with investing, you are talking calculated risks and making decisions based on researched information and evaluation. When you play the investing game this way, you’re not gambling at all. You’re making smart decisions. And it’s these decisions that will land you a fat retirement check.