Small investment guide for beginners
We all heard a story of the American dream in which the hero invests in the stock market and becomes a millionaire in a short time.
For starters, let’s be clear: investing in the stock market is not a scheme where you can get rich quickly. Making a big money takes time and investments, and at the beginning you will definitely have misses, but bear in mind that every job is taught.
Investing is not just for the rich people. There is no need to invest a lot of money. Some people start investing small amounts and slowly increase their investment. Others prefer to wait for a larger amount of savings to start investing.
How to start?
Start by thinking about the following:
- How much money do you have available to invest?
- What is the time period that you want to invest your money or when will you need the money back?
- Do you want to make your money to grow or do you want to make income from the interests?
How much risk are you willing to accept?
- Do you have enough knowledge or someone to show you how to invest?
- Do you want to decide on any investment decision by yourself or do you want it done by professionals?
There are different types of investments. Some will suit you and some are not for you. It all depends on what your investment goals are and how much risk are you willing to take.
Determine the investment objective
Think about why you want to invest, for which purposes. When you set your goals, you can get answers to other questions – how much risk you can accept or how much time you have available.
Determine the risk that you can accept
Risk is an integral part of every investment. Therefore, you should think carefully about the level of risk you want and you can accept. There are different types of risk. The risk may be that you do not earn as much as you expect, but the risk may also be to lose everything you invested.
Some investments can significantly increase over the next 15 years but in the meantime they can significantly lose and gain in value.
Investments with high risk can bring the highest yields but they also have the highest probability of you losing your money. The risk that you are willing to accept will depend of your personality and risk preferences.
Would you like to gamble and drive fast cars? Do you prefer to risk or you like security? Will you be able to sleep at night if you invested your money in something where it’s easy to lose? Or do you prefer to make lower earnings just to make your money safer?
High-risk investments are not always the best solution
For example, if your goal is that in three years you have some savings to buy an apartment, you should invest in safer and more conservative products. If you invest in the long run, you can take a much higher risk, bearing in mind that longer period of time allows you to cope with any possible losses.
Also, if you save for retirement and you have another 30 years before retirement plan, you may be thinking about risky investments, given the long-term time horizon. That way you’ll have more time to grow your money, and thanks to a long investment horizon, you’ll be able to monetize your investment during a period of more favorable prices.
However, when making a decision about investing in the stock market, the most important thing to remember is that the blunders, greed or expectation that large sums of money can be made without an effort, usually have an adverse outcome for those who started investing with this idea in their mind.
Sophie is a blogger from Australia. As a design lover, Sophie is very interested in modern office design, new standing desk and modern white office workstation. Sophie loves to write tips for working women, to read more articles visit her FB page.