For a long time, investment was a thing only reserved for the wealthy. However, as the world economy gets more diverse and more open, this idea has become a thing of the past. With the improved economic infrastructure, people are now finding it easy to find investment options. Nowadays, even beginners should invest for future profits. However, investment requires research, knowledge, and skills. If you jump into it with the excitement of making money without research, you may end up losing your money. That’s said, here is the best investment advice every beginner should follow to become successful:
Set Your Investment Goals
Before you invest in any asset, every beginner should always decide what they want from the investment. Investment goals help you stay focused and aligned in the right direction. When setting your goals, it’s advisable that you make them SMART, i.e. (Specific, Measurable, Achievable, Relevant, and Time-based). As a beginner, having such goals in mind helps push you towards your limits and steer you in a good direction. Warren Buffet´s advice: before buying write on a piece of paper exactly why you want that company. (The price might go up does not count as a reason.)
Live on One Invest the Other
If you are a two-income family, the best advice is to “live on one income and invest the other”. You can choose to live on the higher of the two incomes and still be fine but by practicing this discipline you will end up with a great nest egg almost no matter how well your actual investments perform.
Interestingly, Jay Leno is the perfect example of this philosophy. We all know of Leno from his time as the host of the “Tonight Show” but you may not know that Leno got his start as an act in Vegas. The entire time he was hosting the Tonight Show he was living off his Vegas income and investing his “Tonight Show” income and now his garage looks like this.
Stay Informed
After you have decided on a particular investment line, the next thing you need to do is get as much information as possible. Basically, it’s important to understand where your hard-earned cash will be going. Understanding your area of investment helps you know the market trend and prevent unnecessary losses. Take some time to dive into financial books, reputable online posts, business newspapers, and televisions. Think of every investment as if you are buying the entire company. Ask yourself: If I had the money would I buy this entire company? If the answer is No, then why are you buying it at all?
Learn to Say No
Opportunities arise all time, most are marginal at best. The old saying “keep your powder dry” means to be prepared for the big opportunity and to do that you have to have cash available. Warren Buffet is famous for having lots of cash in his company and then when something like the 2008 crash happens he has the cash available to “load up the truck” and buy great companies at a 50% discount. But if you don’t say no to all the “Okay investments” you won’t have the cash available to take advantage of the FANTASTIC INVESTMENTS.
Use the Buy and Hold Strategy
The best investment strategy for beginners is the buy-and-hold investment strategy, which has been proven to work for many successful investors. Basically, it involves buying investment stocks, bonds, or mutual funds and keeping them for a very long time before selling them.
According to financial experts, if you want to improve your long-term performance, buy quality shares, buying and selling regulation A+ shares is advisable, don’t invest in junk or the latest “hot tip”. Buying “index funds” is a great investment strategy for beginners. Investing in a fund that mimics the S&P 500 index means that you will always be invested in the top 500 stocks since the index changes as companies shift in and out of the top 500. You have minimal management fees since the manager’s job is only to follow the index and it doesn’t change that often.
Once you have a nice “nest egg” in the S&P 500, you can diversify into an index that invests in the NASDAQ index. This would give you some exposure to a bit more risk but also a bit more potential when the market is “hot”. Later you could add other indexes. This isn’t sexy or exciting but it is the best investment advice for beginners to achieve long-term growth.
Reinvest Capital Gains and Dividends
This ties into the long-term investing philosophy. As you begin investing, it is recommended that you reinvest your capital gains as well as dividends. Reinvesting the two gives you an upper hand to strengthen your investment and keep your compound interest grow. If your plant is to have long-term financial stability/goals, then reinvesting your gains and dividends is a highly recommended habit.
Dollar Cost Averaging
The best investment advice for beginners is to invest the same dollar amount every month. This way you will be buying more shares when the price is low and fewer shares when the price is high, so in the long run, you will look like a genius.
Other Investment Tips:
- Don’t invest what you can’t afford to lose.
- Don’t watch your stock prices on a daily or even weekly basis.
- It’s never to LATE to get started investing.
- It’s never to EARLY to get started investing.
- The money is made when you buy not when you sell. Meaning if you don’t buy at the right price it is very difficult to actually make money.
Final Thoughts
The process of investment is always complicated. You need to plan, research, and consult widely for it to be successful. While there are many investment tips, the above-mentioned ones play an important role for beginners. They will help you start off and stay grounded till your investment gets on the right course.
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