Looking to get into investing? Many people want to start investing but do not know how or find the process daunting. This is a shame as investing can be a highly effective way to grow wealth over the long term and improve your financial well-being (and life in general). It is not the kind of thing you jump into and it is important that you take time to learn about investing, so there are a few useful tips that should help you get your journey started. Once you have basic knowledge, you can start investing and managing your portfolio over time.
Table of Contents
Learn The Basics
First, you should learn the basics of investing. Fortunately, the internet makes it easier than ever to get a grip with the basics of investing. You should never invest in anything without understanding how it works and how you make money, so you need to be willing to do your own research. A few concepts to get started with include:
- Stocks and shares
- Index funds
- Compound interest
- Tax planning
Establish Your Investing Goals
It is also important to have financial goals in mind when it comes to investing. Generally, investing is used as a way to build wealth over the long term. Therefore, you should only be investing money that you will not need access to for at least 5 years. This will give your money enough time in the marketplace to grow and ride out any dips that occur (a common part of investing).
Test The Waters With An Index Fund
A good way to get started and test the waters is with an index fund. Essentially, this is an investment fund that will invest in numerous companies within a particular index, such as the S&P 500 – an index tracking 500 of the biggest companies listed on stock exchanges in the US. Essentially, this means that you are spreading your investment across hundreds of different companies to reduce risk and diversify your portfolio.
Avoid Rash Decisions
Patience is the name of the game when it comes to investing. The stock market trends upwards, but there are dips along the way. In particular, the last few years have seen multiple dips as a result of the pandemic, the Russian invasion of Ukraine, and rising inflation. You need to be able to stomach these dips and understand that this can actually be a smart time to invest because you will benefit from eventual growth. Keep in mind that you only ever actually lose money through investing if you decide to sell at a loss, so hold firm and be patient through the highs and lows. It is hard when you first start, but it is best to avoid checking investment performance each day, so you do not obsess.
Have Easy Access Money
Following this, you should not have all your money tied up in investments. As mentioned, investments should be used as a way to build wealth over the long term and remain untouched for as long as possible. Therefore, you need to have easy access savings that you can use if you ever need quick access to money, such as an unexpected cost or if you lose your job. This money can provide peace of mind and prevent you from having to dip into your investment pot.
Invest In NFTs
Along with patience, you also want to diversify your portfolio. Diversification reduces risk as it provides balance so that all of your eggs are not in one basket. There are many asset classes worth investing in, including NFTs. NFTs have burst onto the scene and can help you make a lot of money over the long term. NFTs can sell for a surprisingly high amount of money, especially if you invest at the start of a project. Places like okx.com make it quick and easy to browse and purchase NFTs across different platforms and blockchains. NFTs are also worth investing in because they will give you something you can enjoy, such as digital artwork, music videos, or music. Essentially, this is the ownership of digital assets, and it is a way to verify provenance – this will ensure that you get the maximum value when you decide to sell.
Understand Your Risk Appetite
There is always risk involved with investing. The value of your investment can go up and down, and past performance does not guarantee future results, so you need to establish your risk appetite. If you have a low-risk appetite, for example, then you should avoid volatile asset classes like cryptocurrency and stick with lower-risk investments with diversification.
Rebalance Your Portfolio
Understanding the importance of rebalancing your portfolio over time is also important. Your situation will change over the years, so you need to adjust your portfolio to reflect this. If you are investing in your 20s intending to build wealth for retirement, you can take on a lot more risk because you can ride out any dips in the market over a long period. As you approach retirement, you will need to rebalance your portfolio to reduce risk so that you do not lose money when you need it.
It is also important to keep learning and to immerse yourself in the world of investing. This will help you to develop confidence, take advantage of new opportunities and achieve your financial goals. The best ways to keep learning about investing include:
- Reading books
- Listening to podcasts
- Subscribing to YouTube channels
- Following relevant pages on social media
- Signing up for newsletters
Crucially, ensure that any content you consume comes from a qualified and reliable source.
Hopefully, the advice in this post will help you to get started with investing. This is something that everyone can benefit from doing, but many people do not know how to get started. The earlier that you start, the better, but you also need to make sure that you know the basics and are smart with your money.