5 Investing Tips for Complete Beginners

5 Investing Tips for Complete Beginners

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When you first start investing, the terrain ahead of you can seem truly daunting. What should you invest in? How much should you invest? When is the perfect time to invest?

All of these questions can fly around in the head of a newbie investor and let’s face it, can swamp you if you let them! So, what basic investing principles can we draw on to help first time investors alleviate their fears?

Let’s consider 5 easy investing principles to keep in mind before you start to invest.

Tip 1 – Read Some Good Investment Books

When you want to learn anything of importance you usually go on a course or look for a teacher, right? Investing should be no different.

While you may not have the time to take an in-depth investing course, you should certainly take the time to read some good investment books. These books will help you to understand the investment strategies, principles and philosophies of some of the world’s most successful investors.

The Intelligent Investor* by Benjamin Graham, for example, has been around for decades but contains principles which have inspired some of the world’s most successful investors, such as Warren Buffett.

Learn more about Buffett’s philosophy from books like The Warren Buffett Way*.

If you’re not a big reader then both of these books are available as audiobooks at Audible*.

Tip 2 – Take Your Time

So you’ve read some good investing books, found an online share dealing platform* and you now feel like you’re ready to jump in and invest. Great, but even at this point there is still no need to rush.

Personally, I would pick a few stocks or funds that you like the look of and watch them for a little while, to see how they behave. Also, be sure to research the companies as much as you can, to see if they are facing any present or future headwinds.

While you might be feeling a little impatient, it’s important to take your time and get things right. Remember that the trading fees, stamp duty and spreads involved with investing can turn even small mistakes into expensive ones!

Tip 3 – Don’t Gamble

While all investing comes with a certain degree of risk attached, it’s also true that some investments will be less risky than others. It’s up to you how much risk you are willing to take, but personally I would keep this risk to a minimum when you first start out.

As you become more knowledgeable and familiar with the investment process over time, you might decide that you want to take a punt on something. But always be sure that your investing decisions are backed up by solid reasoning and research.

The stock market has made fools out of many ‘intelligent’ people, don’t become one of them.

While on the subject of risk, don’t forget to only invest what you can afford to lose.

Tip 4 – Diversify

Most of us will have heard the saying ‘don’t put all your eggs in one basket’.

This saying is very applicable when trying to make consistent returns from your investments. It is referred to in investing as diversification.

The idea is to spread your money around a bit in a variety of stocks, shares or funds. More than this, you can also diversify by investing across different asset classes too. All of this with the aim of spreading the risk.

This way, if you have one investment that doesn’t perform as well as you expected you will hopefully have another that does better than you thought. This should mean that you have more chance of making money from your overall investment portfolio.

This isn’t guess work, of course. You need to have a diversification strategy* and you still need to do your research.  

Tip 5 – Invest for Life

Our final tip in this post is that, when choosing a company to invest in, view it as though you will be investing in them for the rest of your life. This might sound a little extreme but it will make you look at the company with a much more critical eye.

While there is money to be made from buying and selling your investments on a frequent basis, for the average investor the costs of doing this often outweigh any gains.

Really, it is far better to invest in good solid companies and reap the rewards over the long term. This could be in the form of dividend payments as well as capital growth.

Keep Calm and Carry On

Hopefully this post will have helped to calm your nerves a little when it comes to investing your hard earned cash.

Remember, there’s no need to rush. Take your time and do your research. Invest in good companies that offer the potential of returns on your capital for the rest of your life. And don’t forget to spread the risk a little by diversifying your investments.

If you still feel like making your own investment decisions is too much for you, then you might want to invest via a robo-advisor instead. These companies use the latest technology to build a portfolio on your behalf for a low annual fee.

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