There is plenty of positives for new investors in making a living from investing. Chief among these are the potential riches that a career as a stockbroker offers. However, be warned, by its nature, the investing landscape can be quite volatile, changing year after year. That is, after all, why it can be so financially rewarding in the first place. Moreover, the high life is achievable if you stick to investing in things that you know and understand. New players to the game should also be aware of the potential difficulties of investing and reading the markets as well as understanding market mechanics. Only after understanding the pitfalls can they think about investing safely, suitably and sensibly. If these are skills you recognize or even use daily, then let’s get started.
Advice For New Investors
For new investors, this isn’t a pursuit solely undertaken by high rollers. If you are good at solving mental equations and forecasting outcomes, even in games, then more than likely you could be an excellent stock investor and vice versa like the stockbroker Shuize Cai. Using many techniques that would be familiar to stock investors, Cai won the trip of a lifetime. Why shouldn’t you be able to do the same?
Start Off Small
Most investment funds will typically approve deposits of between £50 and £1,000 a month. Sometimes, investing might mean locking your money away for at least five years or perhaps even more than ten, so it’s worth thinking of it as — but don’t rely on it being — a retirement fund. It’s especially relevant considering that long-term equities regularly outperform cash savings thanks to the low returns offered by banks and building societies on savings accounts.
It almost goes without saying that it also pays dividends not to be reckless with your money. Instead, think beforehand about what it is that you want to devote it to and never put all your eggs in to the same basket. I know that you are probably thinking that investing as much as you possibly can into a booming stock is an excellent idea but, but be warned, if you plough it all into one company, and that company fails or busts, you will lose everything you have invested. Because of this risk, a far better idea can be to ‘diversify’, which involves dividing up your money across a portfolio of companies.
Invest with Others
Another approach to your initial investments is to devote it through a collective fund, which means pooling your money with other people’s money. An experienced fund manager can then be installed to manage, buy and sell shares on your behalf. Beware that there is a charge for investing through funds, but because the cost is spread among your group, it still works out cheaper than investing alone. Still, for some, it is worth giving some thoughts towards a cheaper option. By this I mean choosing a passive fund, which is run by computers rather than a manager, making it considerably cheaper.
Timing is critical, too, and while it’s impossible to pick the perfect moment to invest and beat the market, some people prefer to put money in regularly to minimize losses. By this I mean, drip-feeding your money into a fund once a month to improve your chances of maximizing your returns. Naturally, this also lowers the risk, too. By picking up fewer shares when the market is rising, and more when it is falling, you average out the overall cost and risk.
Finally, you are probably aware by now that there are many investment funds out there to choose, so be sure to spend an appropriate amount of time selecting the right one for you. Be sure to opt for one that agrees with your financial goals and risk limits. When doing this, study a fund’s history, examining its performance over a prolonged period, not just how it performed in the previous year. Taking all the above into consideration, you should be ready to begin tentatively taking your first steps towards a career in trading. Good luck to all new investors.
Indrajit is a professional blogger and trading system developer. Amibroker expert, WordPress expert, SEO expert and stock market analyst.Trading since 2002, he has started the journey of StockManiacs.net on 2008. He follows Indian and world stock markets closely.