Everybody wants to invest smart, but not everybody wants to put the effort into learning how.
According to Forbes, 62 per cent of Brits are choosing not to invest at all, citing a lack of money or poor understanding of the market as their reason.
If you are ready to make the jump into investing but don’t know where to start, here are 4 tips to get you going.
1. Learn the basics
If you don’t know anything about investing, the smartest thing you can do is spend some time learning. At a minimum, learn the basic investment terminology so you can make informed decisions.
Part of learning about how to invest smart is also understanding what type of investor you are. Some people prefer to use investing apps and manage on their own. Others would rather have a professional handle their investments for them.
2. Set investment goals
Before you put any money into the market, figure out what you want to get out of it. Your age, your current financial situation and how much capital you have available are all important factors. You also need to figure out if you can handle the risk, both emotionally and financially.
Are you investing with a goal in mind? For example, are you investing so you can retire in 15 years? This would require a different investment strategy than if you’re in your 20s and just starting to grow your net worth.
Keep time frames in mind as well. If you can stay in the market for the long haul (10 years or more), your choices may be different than if you want to see faster results.
3. Do your homework
Investments should not be made in an emotional way, which can lead to rushed decisions and mistakes. To invest smart and steer clear of trouble, make sure you research properly before you put your money anywhere. As with everything in life, if something sounds too good to be true, it probably is. Keep your eyes open for red flags such as brokers who promise a guaranteed return on investment. There’s no such thing when investing.
While you should research how stocks have done in the past to understand the market better, good past performance does not mean that the stock will keep doing well.
A better approach is to sit down and figure out an investment budget, if you haven’t yet. Always avoid borrowing to invest. If you are in debt or don’t have an emergency fund in place, you might not be ready to invest just yet.
4. Diversify your investments
The golden rule of investing is to never put all your eggs in one basket. A diversified portfolio is safer from market ups and downs, recessions and crashes. This means investing in different industries and companies, but also using different investment strategies. For example, you can put some money in stocks, index funds and bonds that you plan on holding for years (long-term investments). Then also invest in stocks that you can buy/sell as the market changes.
It also makes sense to consider investing in real estate if you can afford it. Depending on your finances, this could mean buying a small fixer-upper that you can then resell for a profit or getting an apartment in a holiday destination that you can then rent for profit. The alternatives are never-ending, depending on what you’re looking for and how much money you have available. In the long term, however, real estate is rarely a bad investment.
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