Don’t know how to start investing? These 4 rules helped me

Don’t know how to start investing and afraid of losing money? James Reynolds shares four of his key investing rules that helped him as a beginner.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Trying to start investing can be daunting, especially if no one you know has any experience. This was true for me. With no one to turn to, I poured over as many books, blogs, and videos as I could to work out what to do

These are some of the key rules that I learned and that have helped me on my journey.

Rule 1: don’t lose money

Warren Buffett famously said, “Rule one of investing: don’t lose money. Rule two: follow Rule one”. While the quote is humorous on the surface, it’s worth bearing in mind whenever making an investment decision. Sure, investing is about building wealth, but we can’t do that by throwing cash away on thoughtless ventures. The first thing I learned was that I could lose everything if I wasn’t careful. So, I needed to think a lot before making any decisions.

Rule 2: understand the business

How can I be sure if I’m making a good investment? By knowing what I’m talking about. So, when considering a stock, I ask myself:

  • What does this company do?
  • How much does it cost to run?
  • How much debt does it have?
  • What’s its year-on-year revenue growth?
  • Does the company have brand recognition and a stable history of profitability?
  • Does the company have a new product coming out, or a continuing service?

All this information is easily available with a few good Internet searches. Some of it can be tough to grasp at first, but with time and focus it can be understood. There is no way to know if stock will do well in the future. But if I understand the business then I can have assess how well the company can weather any financial storms.

Rule 3: be patient

When I decided I wanted to become an investor, I saw the gains being made by some stocks and felt like I needed to invest as soon as possible. I didn’t do my research and bought Tesla shares because of how much they were going up. Then, when the price came down, I panicked and sold. I needed the patience to learn what I was investing in.

Conversely, if I had held on to those shares, I would have made a profit by now. I also needed the patience to wait for investments to bear fruit.

Rule 4: invest in myself first

The vast majority of people will not become rich just from investing. And that’s okay. Investing is about compounding wealth over time, not becoming a millionaire overnight. Once I realised this, I stopped worrying about how much a stock would go up in a day, and turned my attention to my career. Now I focus on earning enough to invest, instead of how much I can earn from investing.


Investing is a risky business that requires time, patience, careful planning, and as much help as one can get. The whole process definitely felt daunting from the outside, but I learned that it could be understood and used to my advantage.

No one can predict the future. A stock might go up, down, or nowhere, or a global pandemic could crash the market. What I can do is follow some simple rules to keep a clear head and stack the deck in my favour.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young black colleagues high-fiving each other at work
Investing Articles

2 FTSE 100 value stocks I’d buy for my Stocks and Shares ISA in March!

Now could be a great time for fans of FTSE 100 value stocks to go investing. Here are a couple…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Looking for value stocks? Here’s 1 I’d buy and 1 I’d avoid!

This Fool delves deeper into two value stocks she’s had her eye on and explains why she’s bullish on one,…

Read more »

Young black woman using a mobile phone in a transport facility
Investing Articles

With the Airtel Africa share price in pennies, is it a bargain?

With the Airtel Africa share price having slumped by a quarter in just one month, this shareholder considers some of…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

Are these 2 defensive FTSE 100 stocks shrewd buys after recent updates?

This Fool takes a closer look at these FTSE 100 stocks. She admires their defensive traits -- but does that…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

The FTSE 100 closes up after full-year results from leading UK firms – are they buys?

Earnings season brings about a lot of ups and downs for the FTSE 100. Yesterday had some particularly good releases,…

Read more »

artificial intelligence investing algorithms
Investing Articles

Should I buy NVIDIA stock as a British investor?

NVIDIA stock is up two-thirds this year alone. Our writer considers some pros and cons, specifically given that he is…

Read more »

Investing Articles

With £2,000 in excess savings, I’d buy 41 shares in this Warren Buffett dividend stock

Stephen Wright thinks one of the best dividend shares to buy right now might be a Warren Buffett stock that’s…

Read more »

Investing Articles

How many Aviva shares do I need to collect a £100 monthly income?

Aviva shares are well suited for passive income purposes. Our writer works out how many would be needed for a…

Read more »