While investing can be tricky, especially if you're a beginner, there are some rules of thumb that can help you avoid major disasters. If you know what you're looking for, there are fewer chances that you'll miss it.
There are aspects that influence how much money you could make by investing in a certain company. Some factors belong to the market, but others are characteristic of the investment vehicle you chose, the company's size, and even the stocks' sizes.
If you know which sector belongs to the company you're planning to invest, you can get a general idea of your future earning by researching how well that sector's doing. There are usually trends that all companies in the same sector follow, which is why you can sometimes generalize and estimate one company's future if you consider the state of the rest.
In order to investigate these trends, you can search through financial news. You'll find the macroeconomic trends you need, but make sure to avoid being overwhelmed by this information, which can scare you out of investing. It's important to get the general information and maybe even some specific news regarding a certain sector or company.
You should ask yourself whether the sector performs well or underperforms, and how vulnerable it is in tough economic times. This way, you'll be able to choose a sector where you see high growth potential. The ideal is to find a company that's destined for big growth and not a price decline.
When it comes to specific characteristics, you should consider those from some investment vehicles. Stocks, mutual funds, and ETFs usually offer solid growth over time. The main differences between these and bonds are that the latter offer lower but more stable returns.
There's also a difference between the potential growth and the stability according to which stock size you choose. Small-cap ones usually mean big returns with higher risks, while large-cap stocks offer steadier growth potential. It's key to find the best balance between an investment's risk and its rewards.
Answers to basic questions from inexperienced investors
Starting to invest can seem like a leap of faith for beginners. However, you can get the most basic doubts clear on time to start investing!
Investing is all about generating a profit and increasing your savings. If you choose to do it correctly, you can save enough money for your future plans, which can include buying a house, a car, or simply growing your retirement funds.
Since you're planning in advance, it's best to start investing ASAP. Whatever your goals are, you'll need less monthly investments the sooner you start making them. The power of compounding is big and you should try to keep it on your side.
All in all, waiting to invest for any possible reason is essentially costing you money. You're losing all profits you could've gained if you'd already started investing! This is why you shouldn't postpone it, no matter how distant into the future your goals seem to be. Here are some tips to invest during the Coronavirus pandemic.
The issue of what investments to make is much more complicated because there are many different factors to take into account. These may indicate a company's growth potential to some people, but others prefer to take other variables into consideration before deciding what to invest in. It's a personal choice, which you'll be able to make once you're informed of what can affect a company's growth and decline.
As said before, the sooner you start to invest, the less you'll have to pay each month to meet your expected goals. There are also many calculators that'll help you know how much you should invest at the beginning and its results, taking into account many changeable variables.
Before investing you'll need to know what to expect in order to see if you're ready to face it. It won't be an easy and smooth trip, but you can take some measures to pretty much guarantee your success. It's important to stay through the good and the bad years of the market because you'll have more chances to receive positive returns the longer you stay invested.
Beginners: avoid investing scams!
One thing beginner investors should be wary of is investing scams. There are many people who want to take advantage of newbies by offering bad or fake advice.
As an amateur investor, there are some specific things you should look for. One of them is a reliable Financial News Provider. This is a source where you can get true information on the market, a certain stock, or an industry. You’ll be able to use it as a guide for your investments in order to get higher returns.
In the investment world, you’ll find a lot of sketchy information and suspicious people. One type of them is the so-called “investing gurus”. They’re people or machines that’ll try to contact amateur investors and get them to invest in a certain stock or fund. Not only can you end up losing your money on a bad deal, but you can also send your money to a completely fake investment straight to the “guru’s” pocket.
If someone offers you a “great deal” or a “full-proof” investment, stay critical. If the price is low, why haven’t other investors paid attention to it? Is it really possible to get a 30% return? Ask yourself these questions before diving into a “fantastic, one-time offer”.
Most times, if the profits are too good to be true, it’s because they are. An investment scam will only work if they catch the eye of potential victims, and what a better way to achieve this than with juicy returns. Try to stick to professional platforms and more down-to-earth possibilities.
Other scammers will try to get your attention by offering some “insider information” that allegedly no one else has. Having unreleased information can boost your returns, which is why nobody will be giving it to random people, especially beginners. There’s usually a catch, probably that’s just fake news.
Lastly, stay away from hard, complicated investments. Even as a newbie, you can start with an investment you know, like an online brokerage account. You shouldn’t trust an offer just because it’s full of big words and numbers that make it look professional. As a beginner, you’ll have time to learn!
You can start with these 12 terms you need to know if you plan on investing.