No one is born an investor, and neither was Rome built in one day. Investing successfully requires effort, learning and experience. Do not let one-off success stories drive you into making snap decisions. Think things through in detail first and think for yourself.
Looking to explore the world of investing? Let us guide you through a few core principles. We’ll look at investment planning, how to understand the market and how to find an investment path that is right for you.
Having a proper plan in place is a first step towards success. Planning is not only about numbers, it is also about goals, interests and more. A solid investment plan will define which type of investor you want to be and what you value when doing so.
What are your goals?
Do you have one big goal in life, or do you chase different smaller dreams? Think about it when planning out your investment strategy. Are you looking at short term gains or are you looking for a plan to retire early and do you think more long term? Do you want to acquire assets like real estate or land or are you more interested in cash benefits? What are you passionate about and how can you use your passion to make better investment decisions? Understand this first before thinking about any further steps. Understand who you are as an investor and what you really want to achieve.
What is your risk appetite?
Investments can be categorized based on risk. Higher risk investments naturally bring higher short-term gains but the risk of losing capital is significantly higher. Lower risk investments offer lower returns and are often planned out over much longer periods of time. Although a safer alternative, lower risk investments are never ‘free-of-risk’ investments, do not forget that. Looking at your goals as well as many other factors, it is important to first think about the level of risk you as a person feel comfortable with.
How much can you invest?
Having a plan and having committed to a risk level, it is important to understand how much you can invest. You need to understand the reality of things and make sure you prioritise your personal finances and expenses first. Ideally you do not invest funds that you need to live your daily life.
Staying ahead of the market you’re investing in is crucial. It can take investors years to fully understand and learn about the stock market as well as other investment alternatives. Predicting and dealing with the market is both art and science. Many books have been published about dealing with it. Read up about it, read financial news and take courses where you can. Be informed about what is happening in the market as it will help you to make better investment decisions.
The choice of where, when and how much you want to invest, depends heavily on your investing appetite as well as the resources you have available. Once you have familiarised yourself with the market, you can start looking into the different types of investments available.
For example, new investors typically tend to start with bonds and mutual funds instead of stocks and real estate. This is mainly because of the greater simplicity, lower entry cost and general lower risk profile these investment types offer. As your confidence and funds grow, you can slowly start to branch out and experiment with other options. Eventually, you will discover the options that best meet your risk appetite as an investor, allowing you to build a prudent and diversified portfolio suited to yourself. That said, be sure to always factor in your existing expenses before making any final investment decisions.
It is crucial that you can maintain your financial health and lifestyle before undergoing any investment decisions.
Learning to invest successfully will take quite a bit of time and patience, especially when you are just starting out. Be prepared to take risks and potentially some losses as well! After all, the market can be a challenge to understand. It is important that you maintain your willingness to learn in theory and in practice, from courses and books, financial news and other investors, but most importantly, from real life experiences. You can then apply the lessons that you have learnt to your future investments and slowly build your way up. Remember that knowledge is key and that your appetite to continue learning will one day lead you to success!
Investing is a lifelong learning process that everyone will have to go through if they aim to be successful. You will need to possess resilience and patience as you experiment and discover the right investment options for yourself. It is also vital that you plan, keep yourself well informed of the market and maintain a constant desire to learn. Good luck!
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