Before entering the world of investing, there are several key factors you need to understand if you are going to make it work for you. Too many people dive in without knowing what they are doing, lose their investments or see it depreciate, get cold feet and pull out. As a result, they never invest again, scarred from the experience.
Sure, it’s a risky game but it is one we all have the potential to win at. In order to help you make a success of your investments, we’ve put together these top tips for first time investors to help them try and make the most from their money.
Invest only in what you understand
The saying ignorance is bliss might apply to plenty of areas of life, but it certainly isn’t relevant when it comes to investing. You need to understand exactly what you are investing in, otherwise there is little chance of you being able to cut through the noise and technicalities to discern the meaningful information that will help you decide whether a stock is good or not. You might be able to sit there all day looking at the Live Copper Price, but if you don’t understand what it means, how can you make a judgement on a successful investment?
Make the investments you want
Once in the investing game, you’ll soon discover that everybody has a hot tip. No matter how trust worthy the source, always carry out your own thorough research before investing. It’s your hard-earned cash that will be going in and you need to be making sure your investments are informed, not a gamble based on a tidbit of information.
Ride the winners
You might have a set of personal rules that govern how much you are willing to let your investment grow before selling – for some people, it will be triple, others will ride it until it is worth 10 times their initial investment. While rules may be good, be prepared to be fluid – if you’ve got expertise or a feeling that an investment hasn’t reached its full potential, then don’t be restricted by your rules; instead, ride the winner all the way to the bank.
Sell the losers
The opposite is also true in that some of us hold onto stock that is depreciating in the forlorn hope that it will bounce back. Be realistic and don’t be afraid to admit you’ve messed up an investment – selling a loser takes as much guts as riding a winner, but getting out and moving on early can prevent your losses becoming even greater.
Be open minded
Chances are that the companies stock that could make you thousands of dollars is a business you’ve not even heard of yet. Let’s rewind the clock to 1986. If you invested $1000 in Microsoft on March 18th 1986, then the value of your shares in 2016 would’ve rocketed to $821,261. Microsoft wasn’t exactly an unknown company back then, either. By having an open mind and looking for companies beyond those in the Dow Jones Industrial Average, you could invest in the next Uber, Facebook or Instagram before anybody knows about them and turn a small investment into an eye watering sum. That’s the dream.