One must learn how to budget, save, and invest to achieve financial independence. Among these three, investing needs more focused attention and targeted strategies to reap high returns. With returns as your measurable target, you can identify financial returns and monitor your investment’s gains over time.
If you are new to investing and want to learn more about some practical strategies that work on almost all investment forms, then you’re in the right place. This guide contains a workable approach for beginners in investing.
Types of Investments for Beginners
Before we look into the practical strategies, let’s first explore different investment options that are ideal for newbies in investing. Most of these require a low initial investment, which you can acquire through your savings, online direct lenders, or crowdfunding, among many other ways!
High-yield savings account
You may open a high-yield savings account through an online bank. This investment allows you to have regular access to your funds anytime while earning you high interest compared to regular savings accounts.
Certificates of deposit (CDs)
Compared to high-yield savings accounts, certificates of deposit tie up your funds longer. It means you can only gain access to your money if the CD matures, which typically happens in different periods like six months, one year, five years, etc.
401(k) or other workplace retirement plan
With 401(k) investment, you can grow your money tax-free, all while sharing half of the contributions with your employer.
Mutual funds
This type of investment allows you to invest in bonds and stocks, among other assets, allowing you to build wealth over time.
Exchange-traded funds (ETFs)
It’s quite similar to mutual funds, except that with an ETF, you can only trade full shares and buy and sell based on market price.
Beginner-Friendly Investment Strategies
If you have a specific investment vehicle in mind but aren’t so sure about starting and need to build your game plan first, here are some beginner-friendly investment strategies that can help you kickstart your investing journey!
Set your investment goals
Like budgeting and saving, investing also requires a clear idea of your goal. Knowing your desired result, you can match your objectives to your methods and strategies. In addition, investment goals allow you to identify the type of investment that would satisfy the initial goals you have in mind.
If you have a specific type of investment in mind and think that your current investment goals won’t be attainable with that type of investment, maybe it’s time to rethink and reevaluate your options.
Focus on what you know
In investing, you also have to pick your niche so you can easily thrive since you already have an edge. For instance, if you have a background in the food industry, it might be easier for you to identify which companies to invest in. While investing in a single company poses high financial risks, if you have solid knowledge and experience in a specific sector, you probably have a good eye for picking the right prospects.
In addition, make it a hobby to read about investing and learn more about investment experts. Try to enjoy and love the routine involved in investing so you will see this as a gratifying distraction rather than a sacrifice.
Learn to enjoy the waiting game
Investing is a long game, and you must learn to enjoy the art of waiting. Many beginners fail to understand the long-term nature of this financial activity, prompting them to quit early. However, serious investors must learn how to wait, knowing that since 1926, the stock market has beaten cash every two decades. Learning the ropes of investing early would be ideal, as well as working on your patience and evaluating your risks as you set your goals in the beginning phase.
Aim for a diverse portfolio
Diversifying your portfolio doesn’t only mean investing in different companies. It’s more about looking for other kinds of assets like cash, bonds, and equities. It keeps you afloat in case one of the assets plummets down. It’s a core investment strategy that makes someone an expert in investing.
Evaluate your investment portfolio
Besides looking for different assets, you should regularly evaluate your investment portfolio. As you explore higher-risk investments, you should try to rebalance your portfolio and evaluate how much risk you’re willing to take. It means adjusting the mixture so you stay consistent with your set goals.
Don’t get too emotional
Like following and betting on sports teams, investing can be a rollercoaster of emotions. However, you must learn to shelve your emotions to avoid irrational snap decisions, which may lead to frustrating losses. You can control your emotions by consulting an independent financial advisor (IFA). You can shop for the right deals in the current market by talking to an expert, spotting risks and opportunities easily, and learning more about general wealth management.
Final Thoughts
Investing is a complex concept of earning money, which may involve financial risks. If you’re investing without purpose and don’t believe that risk can be converted to returns, then investing may not be an option for you. With financial discipline, financial literacy, and a decent income to sustain your investments, you can start your journey toward building wealth over time!
