So you’re ready to dip your toe in the water of all this investment stuff? (At least, we hope so – if you’re looking to learn about skydiving you’re definitely in the wrong place.) We know it can seem intimidating, but we’re here to guide you through it. Jump in – we’ve got your inflatable armbands, goggles and swimming hat at the ready. Here’s our 7 starter tips for investing newbies.
1. Learn how investment works
‘Investing’ is a term sometimes confused with ‘saving’, but the two have different meanings. ‘Saving’ refers to setting some money aside, and although it generally doesn’t increase in value on its own, you might gain a bit of interest in a savings account. ‘Investing’ is purchasing assets such as stocks, shares, bonds, etc. with the aim of it growing in value, gaining more money when you eventually sell it. Before you start investing, it’s wise to check your financial fitness with an overview of your income, outgoings, existing debts, savings and assets. Devise an investment plan, ensuring it aligns with your financial situation and life goals.
2. Follow your investment plan
Now you can start getting into detail. Are you seduced by stocks or more convinced by cryptocurrencies? Do you want to invest in assets that are risky but offer a higher potential reward, or would you rather play it safer? What works best with your goals? Don’t forget to consider what sort of companies or sectors you want to back (for example, those with a high commitment to the environment, or those that spark your interest in new technology). Consider whether short- or long-term investments fit your time frame better. If this all seems too hair-raising, consider trending themes, a low-risk option where a lot of the decision-making is done for you. Either way, once you have a plan, stick to it!
3. Take calculated risks
Risk isn’t always a bad thing, but finding the balance is what leads to the pay off (plus some potentially painful learning experiences!). It’s vital to only take risks you are comfortable with. Research, research, research to learn all you can about your planned investments so that you don’t get into a financial flap.
4. Be honest with yourself
Although we’d all like to consider ourselves savvy investors with deep pockets, the truth can be less thrilling. The most important principle of investing is that you know your limits – and those of your financial situation. Your focus needs to be on making realistic money moves that help you achieve your goals – not plunge you into stress or debt.
5. Don’t put all your eggs in one basket
Diversify. Changes in markets can happen quickly — before you even can begin to react. Diversifying your portfolio will help protect you during these dips, giving you time to make the right decisions. Some investment products, such as Yuh’s Trending Themes, have diversified portfolios built in and react intuitively to market fluctuations.
6. Keep your cool
Bad days, bad investments, and wanting to be a bad-ass can all have a negative effect on your investment strategy. Always stick to your plan and avoid the temptation to make impulsive decisions.
7. Follow Warren Buffett’s 2 main rules
Billionaire businessman and philanthropist Warren Buffett is a champ at evaluating value stocks and investing. It’ll take you a while to get to his level though, so in the meantime, stick with his 2 major rules:
- Rule 1: Don’t Lose Money.
- Rule 2: Don’t Forget Rule Number 1.