What Every Newbie Investor Should Know
Updated: Apr 3, 2020
The following is an article “What Every Newbie Investor Should Know” by Marc Primo.
After you land a stable job and have saved up a significant amount of money over the years, you are now ready to take the next step in ‘fiscal adulting’ by venturing into investments. The problem is you don’t know the first thing about how money really works out there. Don’t worry because it’s not that hard to learn the basics of how to upgrade your investment portfolio in no time.
Make a list of your alternatives and each one’s pros and cons before you invest. Consider how you are transitioning from a stable savings account to placing your hard-earned money in an ever-erratic market and be very careful. Don’t let the recent U.S. stock market fluctuations dampen your spirit because even if the markets may turn wild from time to time, there are plenty of ways to go on a rebound.
Below are some of the best tips for newbie investors who want to stay afloat in the volatile realm of financial investments.
Stay the course. The stock market averages an annual gain of 10% so you should plan about making long-term investments rather than short ones from the onset. There’s no need to worry about daily shifts. Instead, focus more on when you should sell your shares. Learn to, as they say, ‘stay the course’ by holding your stocks, ignoring the temporary market price swings, and waiting for your investment to come back up after a few years.
Know when to buy benefits. Last year, markets ended on a down note and experts predicted that growth will be slow during the succeeding year. While this might probably deter you from making potential investments, buying shares in a down market can actually make for better results in the long run. Most day traders often say “buy low, sell high”, so it makes sense to buy when the stocks prices are low, stay the course, and have faith on your long-term outlay.
Make your assets liquid. In making sound investments, make sure you have other funds that you can source from in the event that you suffer losses or sell stocks. Get yourself an emergency fund that can cover your needs for the next six months or longer. The more savings you tap and get rescue money from, the better your chances of making your assets liquid.
Learn about dividend investing. This type of investment requires strategy in how companies pay dividends to its investors per quarter. Carefully review how the companies you’ve invested in are doing in the market to determine their profit and your entailing share. You may choose to cash out or re-invest them by purchasing more stocks, although the latter is more advisable if you want to grow your profit through the years. If you opt to cash out, then your dividends can be considered your passive income. Either way, consider placing your profits in dividend-rich stocks to make your investment portfolio bigger.
Opt for mutual funds. Many are familiar with how mutual funds work. Several investors place their collective money into a diverse portfolio, stocks, or bonds and then divide the profits at a given maturity date. It may sound simple enough but there are more things you should learn before investing in a mutual fund including portfolio management, risk tolerances, and return goals to name a few. You should carefully review which mutual fund to invest in and study your options capacity to avoid problems so that projections are in tune with your long-term goals. You may allow a professional to manage your portfolio, but as it will cost you money, you might as well brush up on your stock market 101 and learn how you can handle your own investments.