Five Best Tips for Beginners In Investing

You must have known by now that you will never get rich on one paycheck. Investing is necessary for all future millionaires since that is the only way to make extra cash. The greatest investor of our time Mr Warren Buffet, once said, “Never depend on a single income, make an investment to create a second source.”

The article will focus on investing tips for beginners who have never invested in their lives. I want to commend you for taking this bold step because it means you are ready to claim your destiny. I believe all of us are destined to be wealthy and successful, and investment is the first step towards achieving that goal.

The following are five main tips that can start you off in investing.

1. Start Now and Block Naysayers

You may consider starting now since procrastinating will only make the situation worse. Identify an investing opportunity and research as much as possible, then go in. In this instance, do not think about potential returns yet because first investments can be challenging.

Invest as if you are not expecting any returns from the opportunity. Also, ensure that you have enough money to support the investment when it starts running. Those interested in buying stocks should concentrate on the companies and their growth over time.

There will be many naysayers at this point who will advise you to buy a car instead or go on vacation. Please do not listen to them because they are the same people who will come to ask for a loan when your investments pick up. Most importantly, start now and block all the doubts.

2. Focus on Low Costs

As a beginner, you need to go for very low costs in your first experience to avoid being overwhelmed. Some investments can be very demanding, thus draining all your savings without making any returns.

In most instances, you should aim at doing less but still get involved in checking where your investments are going. I usually advise beginners to buy stocks because they will not incur major costs in the long run. Also, they will learn a lot about investments because the companies involved will advise them on how to make more from their investments. Do not buy many stocks even if you have the money to do that.

The main aim of investing is to make money, so do not drain your savings in the name of keeping the investment afloat. Consider spending as little as possible while still expecting returns, no matter how small. You may want to settle for minimal returns in your first investment to avoid instigating significant risks.

3. Emphasize Saving Percentages

If you forget anything else in this article, do not forget this one. Saving is still the most important aspect of all these. A certified financial planner named Ben Hockema explains that "You cannot control the performance of investment, but you can control how much you save." Never use all your savings regardless of how attractive the investment opportunity looks.

I can guarantee that investing all your money will instigate disappointments and unnecessary stress in your life. That is because you will start expecting immediate returns from the investment, which is not realistic. Some investments may take up to three months or a year before any returns are affirmed. Hence, it is imperative to invest part of your savings and ensure that you have substantial amounts of money to support you even if the investment does not work.

Hockema advises investors to save first and then invest to avoid making wrong decisions. Beginners should take the advice even more seriously since they are stepping into new financial environments, which can be challenging. Perennial investors may take more risks in this category because they have been through the process and challenges. Warren Buffet said, "Do not save what is remaining after spending, spending what is left after saving." Thus, saving should be the first step before investing in finances.

4. Set Investment Goals

Investing without goals will not amount to anything. All investors should have a goal that guides their activities and commitments towards particular ventures. For instance, you may invest in buying a house or going on a vacation to the Bahamas. The goal must be written down, and you can place a dollar on it to ensure that your activities are still aligned with your goals.

Investors can pay a down payment on a house and then work hard to clear the balance. One will be motivated to participate in the investment if there are goals involved. Many people invest without goals; hence, they misuse finances or returns from the venture. That is because, many a time, they have no use for the returns or dividends they earn from the investment.

Goals are key for beginners, but they should not get frustrated if they fail to achieve some goals. They should hold themselves accountable and try again since investing is not easy. Also, beginners should make reasonable goals that will not discourage them at the end of the day.

Beginners should take time to inquire from other investors who have invested in the same venture and their returns. That will outline a rough idea of what they should expect going forward. You cannot invest blindly without talking to others who have gone through the same road. These group of investors will help you in creating reasonable goals.

5. Determine Risk Tolerance

Beginners must ascertain their risk tolerance before they invest in any business venture. Risk tolerance is determined by occupation and monthly income. Those who have low income automatically have low-risk tolerance; hence they should go for lowly investment opportunities with fewer risks.

Investors with numerous income streams may have a high-risk tolerance since they are likely to get the money again and try again. Beginners with high income may entertain huge investment ideas with great risks. On the other side, those with high income have low-risk tolerance because they do not like taking risks.

Those who have no history of taking risks should not entertain major risks in their first investment. They can go for low-risk investments even if they do not make much money. That will be a stepping stone into major investments when they get used to the environment.

Conclusion

Beginners should invest after saving and ensure they are ready to make losses. That way, they will be better off when they make profits since it will come unexpectedly. Investment returns may take up to three months or a year to actualize; thus, saving is significant.

Investors must also focus on low costs with reasonable goals aligned with the business venture. Beginners should walk away from investment opportunities with high costs since they are likely to be disappointed ninety-nine per cent of the time.