How to learn to invest?
Investing is a tool through which you can earn multi-million and even multi-billion dollar fortunes. The richest people in the world remember how they started with the right investment of a hundred or two dollars. Therefore, some of us often think about how to learn how to invest in such a way as to receive an income that is enough for a prosperous life.
It may surprise you, but there are a lot of investors. More than 13 million brokerage accounts have already been opened on Mosbirzhe alone.
Where to start for a newbie?
You can find a lot of advice on this part, but not all instructions on how to become an investor are correct. Often in recommendations on how best to learn how to invest from scratch, a beginner is offered to first solve their financial issues. The main idea is to set aside the amount of money that you do not mind losing. In addition, it is usually recommended to regularly set aside a percentage of monthly income that can be invested.
Some believe that before becoming an investor, you need to close the loan. This is not the best solution: often people underestimate the amount of monthly expenses and get into even more debt. The ideal recipe is this: first, agree with the bank on the lowest monthly payments. Second, set aside part of your income to pay off the loan, and invest part of the money. So you will not lose motivation, close the loan and buy what you wanted.
But there is another important component: an effective tool in the work of an investor is knowledge. Morning viewing of stock and financial news, regular monitoring of the securities market will become part of your lifestyle. It is important that the novice investor realize this.
What knowledge is needed? This is:
- economic and financial, without which no competent investor can do;
- political – you will have to be aware of all events, as they directly affect the economy;
- have an idea about the field of activity of the companies whose shares you buy;
- general: a broad outlook will help you see new investment opportunities and avoid non-obvious mistakes.
Invest on your own or with assistants?
In tips for beginners on how to learn how to invest step by step, it is recommended to use the services of a trustee or mutual investment fund (PIF). In this case, a person gets rid of the "headache" – the need to constantly be aware of the intricacies of the securities market.
Typically, an investor builds a portfolio of stocks on their own. Sometimes this ends badly: an amateur buys only shares of companies in one country or in one industry. If you are unsure of yourself, use the services of funds. They buy shares of reliable companies, and in some cases, entire funds. There are about 600 such organizations, if not more. When choosing, pay attention to the period of their existence, volatility and profitability.
By the way, about profitability: often it is less, since part of the portfolio is made up of stable companies, slowly, but growing in price. On average, you can get 10% per year, but it happens that funds pay much more – up to 30%.
Another option for beginners is to find partners on an equal footing. It could be relatives or friends. It may turn out that their knowledge and experience will help to quickly achieve a result that would take years if a person acted exclusively on his own.
Stocks or bonds?
Bonds are securities with a yield of no more than 6% per annum. The advantage of this investment is stability. You are guaranteed to receive the money that you invested as soon as the period agreed with the state or the company ends. You will also be paid interest – the income from them is small, but will block inflation.
Although bonds are safe, many still prefer to sit on a powder keg, investing in stocks and having no experience in the stock exchange. What tools should a beginner use to learn how to invest from scratch in reliable stocks of companies?
The investor must choose the right broker. This is a specially trained person who works on the exchange, performing tasks for buying and selling assets. The broker must meet the following criteria:
- have a license for the right to engage in brokerage activities;
- be accredited on leading exchanges and trading platforms;
- have an acceptable threshold for entering the stock market for the client, that is, the minimum amount based on which the broker is ready to make transactions;
- offer a reasonable commission for yourself: a percentage of each transaction or a flat rate.
You also need to open an individual investment bank account, which will provide certain benefits related to taxation.
When deciding what to invest in, a person must decide on a strategy: understand how much he is ready to take risks, work with which assets is most attractive to him.
How to distribute money?
In the recommendations on which companies to invest start-up capital in, it is advised to start by buying shares of start-ups, which are estimated by experts as promising. Such stocks are inexpensive, the risk is low, and you can easily start building a portfolio with them. True, the shareholder will receive the first dividends in two years, not earlier.
In addition, when developing a strategy and plan on how to start investing correctly, asset diversification is important. This is popularly known as "not putting all your eggs in one basket". Even an issuer that looks reliable and promising can experience force majeure, and the assets will go to zero. If a company or a venture fund offers to invest, promising high returns during the year, this is a natural reason to be wary.
And most importantly – to understand that success in investment activities directly depends on everyday hard work. The investor is an intelligent economist, a prudent strategist, a person with a broad outlook. Without these qualities, good portfolio management is simply unthinkable. Becoming an investor is not an easy path. But the result is worth it!