Investment Tips For Beginners

Investments can sound scary to the average person, and might seem like something only the wealthy have. In reality, savvy investing can be accessible to anyone who is sensible with their money, and can be used to boost your income and give you a comfortable nest egg for the future. Here’s everything you need to know about investments for beginners. 

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What Is An Investment?

An investment is a risk; you essentially gamble your money with the hope of turning a profit. You can invest in almost anything, such as the popular options of shares, bonds or property, or the more unusual options of farmland, wine, or technology firms. 

The most common way most people start investing is in the stock market. You buy shares in one or more companies with the aim of making a profit. In the best case, you can earn a lot of money, but you do run the risk of losing it all. 

How Does The Stock Market Work?

The stock market is where buyers and sellers meet to sell shares. A share is a small part of a company listed on the exchange. Many firms offer investors the chance to back them with cash, allowing them to grow and boost profits. You own a small piece of a company and become a shareholder. 

The price of share is set by the firm offering a share first, but the value will fluctuate according to financial results, the economic health of the country the firm operates in and the opinion of City buyers. 

What Kind Of Growth Can I Expect?

Any new investor will want to know what kind of return they will get on their investment. Unfortunately, nobody can predict for sure what you will get out of it, but you can get a realistic idea of what might happen. To get the best return, you have to keep your head.

If you want a large return, you need to be prepared to take greater risks. Try to diversify your portfolio to lower your risk; invest in different companies, industries and regions. If one investment doesn’t work out, you have the others still going that could balance back out your money. 

If you’re saving over the short term, not take too big a risk. For best results, invest over a period of at least five years. If you can’t do this, you’re better off finding a way to lower your monthly bills, and save your money the traditional way instead. 

When you start investing, review your portfolio regularly. Keep an eye on how shares are performing so you’ll know when the time is right to sell a share on. Don’t panic, whatever happens. Shares can go up and down, so try not to leap to buy or sell just because everybody else is. 

Is Investing Right For Me?

You’ll need to think seriously about why you’re considering investments. In the long-term, stocks and shares have outperformed money in savings accounts, so they can be well worth your time. 

However, there is no guarantee that this trend will continue, so investing is really only for those willing and able to take that risk. Before buying shares, you need to weigh your personal circumstances, the health of your finances and your willingness to take a risk with your money. 

Be aware of who you take advice from, as there can be a lot of misinformation going around. You’d be better to speak to an accountant, then take a tip from a friend. Don’t be lured in by supposed hot shares that you hope will rocket in value. There’s no guarantee in stocks, so only take the risks you can afford. 

Remember that investing isn’t a quick fix, and should only be considered if your finances are already in a good place. Don’t invest in the hopes of earning the money to pay off debts, as this could just land you in further trouble with your money. 

How Much Should I Invest?

Many investors do well by drip feeding smaller amounts into the market rather than dropping a large lump sum. As a general rule, you shouldn’t invest more than you can afford to lose. In the event of a stock market crash, you could face losing a large sum of money. This is why many financial advisers suggest investing for five years, as this gives you time to ride out bumps in the market. 

Always keep a close eye on the market and be sure to never risk more money than you can afford to lose.