Getting started with investing: 6 best tips for beginners
Starting to invest in the financial market can be very simple if you have good tips to guide them through their first steps. Read on to learn how to make the best profit possible even if you have never bought a stock before.
What every beginner needs to know about investing
Indeed, investments can be a sea of uncertainty, especially when looking for investing for beginners.
After all, there are so many courses, tips, and “unique opportunities to triple your money” that it’s hard to choose.
Financial health can be achieved through a simple and free tool: a good and realistic budget. Read this article and learn step by step how to apply this tool well in your financial life.
However, here is a manual so you can guide your first steps and minimize errors. So, read don’t to get our best investing tips for beginners!
What is investing, and why should you do it?
In fact, the concept of investment is extremely old. This is believed to be older than money. However, as our objective is to talk about investing for beginners, it is very important to reinforce it.
In financial terms, investing is putting money or something that has monetary value into an activity that generates a profit. Unlike work, an investment does not necessarily require your ongoing effort or time.
As some authors say, investing is making your money “work for you.” Currently, when we hear that word, the first image that comes to mind is action. However, it was not always like this.
Most likely, for your grandfather, investing was something very different. Open a chain of stores, buy land and livestock, or build houses for rent.
In fact, this is a very popular form of investment even today. However, these have as a common characteristic the fact that they require certain knowledge and practical skills from the investor.
In addition, some of these investments also require a lot of money. Indeed, it is probably for these reasons that our generation has strayed so far from these.
Thus, dealing with corporate papers is relatively easier. Plus, you can start with little money and do everything from your smartphone.
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Why do I need to worry about investments?
In fact, in the concept of investments, there is already a good reason why you should invest. For many, mastering this activity can anticipate or guarantee retirement.
In addition, it is extremely positive to have an extra income without having to have another job. Therefore, over time, investing is no longer just an activity of intellectuals or rich people.
Today, this is practically a necessity.
When should you start investing?
You should start investing when you’re ready for it. In fact, I know this answer doesn’t help much. So, let’s explain how you can know you’re ready to invest.
For this text, consider that investing is equal to investing money in the financial market. Thus, whenever we talk about investing, we are talking about trading shares on the stock exchange.
Well, there are at least four steps you need to follow before creating a profile at an investment brokerage. Below, we will explain them one by one:
Set up a budget
Before you start being the next Warren Buffet, you need to know what your monthly cost of living is and understand your spending.
With this knowledge, you will be able to know how much you can invest per month without compromising the commitments made.
In addition, you will know which expenses you can avoid, leaving you with more money left to invest. This is the first step not only to starting investing but also to taking control of your financial life.
Build an emergency fund
Unexpected debt can jeopardize not only your budget but generate endless debt. So it is important to be prepared for this.
Save money every month until you accumulate an amount that can cover your most important monthly expenses. This amount is also excellent support in the case of dismissal or career change.
In addition, it can save you from debt in months when your investments don’t generate what you expect or give a loss.
The idea is to have at least 6 months of your monthly expenses accumulated in a savings account, for example.
Pay your debts first
You can find the best opportunities on the market and earn a good percentage from them. However, it won’t make any difference if you accumulate more and more debt. So, before investing, pay off your debts.
Start saving for your retirement
It is possible to have a comfortable old age without major unpleasant surprises in financial terms.
However, this needs to start being built today. Invest in your retirement, whether via 401(k) or any other modality.
If you’ve already put these four steps into practice, you’re ready to invest. To get started for real, take the following tips:
What are the most common types of investments for beginners?
On social media, there are thousands of “investment advisors” who point out stocks to buy and get rich in months. However, for those who are new to investing, our tip is to ignore all this.
At least for a while. For beginners, we recommend three types of investing: index funds, ETFs, and bonds. Learn more about these options below:
Studying and selecting companies on the stock exchange is not an easy task. Especially for those just starting out in this market. That’s why we recommend starting with index funds.
When you buy these funds, you are actually buying a set of individual stocks. This reduces your work and lessens the risk of buying specific stocks.
These are funds that basically replicate a specific market index, such as the S&P 500. They generally charge lower fees because they do not require expert analysis in asset selection.
Exchange traded funds (ETF)
ETFs are also equity funds. However, the difference is that these are sold on the market as if they were shares of a company. Typically, the fees for putting money into this type of investment are low.
This makes them very interesting for the novice or low-budget investors.
These are business or government loans that will be repaid within a certain period. In the meantime, you receive a percentage of interest.
This type of investment is extremely safe, as you know how much you will earn. In fact, this feature is interesting for investing beginners. However, the yields of this type of action are low.
Here are some quick investment tips that can save you a lot of frustration:
How to choose the right investment for you: 6 tips for beginners
Get to know now six tips and expert information for investing beginners to start well in the stock market!
Know the investments
To begin with, it is important to have basic knowledge of market operations. For that, you must read and study about the subject.
We recommend that you start with classic books by renowned authors such as Paulo Samuelson, George Soros, and Warren Buffet.
Understand which stocks you are buying and why you are buying them
It is very important that you have a plan with medium and long-term goals. Try to follow it regardless of the “new stock market fad”. Many who follow these trends lose money in the short to medium term.
Diversify your actions
Why bet on a single horse when you can profit so much more by betting on several? When it comes to stocks, diversifying means being more likely to profit and spread risk.
Your movements in the market cannot match your emotions
Make completely rational choices and avoid making decisions based on feelings. If investing is a roller coaster of emotions for you, something is wrong. In fact, good investment strategies are boring.
According to Paulo Samuelson, investing is as fun as watching the paint dry or the grass grow.
All the money your investments generate must be reinvested. This will ensure the “snowball effect” that will make your investment portfolio grow more and more.
Learn to read a prospectus
This is a mandatory document issued by companies. This one provides valuable information about the companies you are studying. Learning to read them can inform decisions and improve your income.
One of the initial steps an investor should take is to set up a good emergency fund. To learn how to do this, see the article below!
An emergency fund can save you from accumulating debts. But, to use this feature, you need to know how to raise these funds. So, read on to learn how to build an emergency fund!
About the author / José Gonçalo
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