Investing should be easy enough for anyone to pick up, and these suggestions will help.

Disclaimer: The information in this article is not intended as, and should not be construed as Financial or Legal advice. All investment and financial opinions listed below are from the personal research and experience of the writer, and are intended as educational material. You should not make any financial, investment, nor trading decisions based on the information provided in this article. Do consult in and seek advice from a professional financial advisor, and undertake independent due diligence before making any major financial decisions.

Most people constantly procrastinate when it comes to growing their wealth and investing in the stock market. So kudos to you if you’re amongst the few who decided to translate your thoughts into actions. More often than not, people are so excited that they dive headfirst into investing without understanding the financial risks that they’re undertaking, and soon they find their money getting wiped out— causing unnecessary stress and worry.

I am not trying to scare you away from investing, but rather warning you that due diligence is of utmost importance before making any financial decisions. Don’t blindly invest into assets you don’t understand.

Investing and buying stocks aren’t all that hard. What’s tough though, is picking companies that consistently beat the stock market. Not many can achieve this feat, and that is perhaps why you’re on the lookout for investment tips.

In this article, I offer some investing tips that I personally adhere to, and that I think is of great importance for the beginning investor.

With that, it’s now time for our money to make more money.

1. Understand the Basics of the Stock Market

Most beginners often skip the crucial first step, that is to learn the basics. Without awareness of the basics of the stock market, it is virtually impossible for you to build your own investing or trading strategies. I recommend spending at least a week understanding the different terminologies and things to look out for when analysing a company or stock.

There is a plethora of educational resources available for you — Google, YouTube, books. When I first started out, I watched loads (and I mean LOADS) of YouTube videos, and read a few investment books. I also attended a few live webinars by professional investors and in all honesty they offer minimal value-add, given that I could find these resources online anyways.

This sets up the foundation for you to build on. You’re building a habit of conducting your due diligence before making any moves. This will prove useful when you go on to break down the financials of different companies.

I will be publishing separate articles on basic investing terminologies.

2. Select a Stockbroker

Choosing a brokerage service that is aligned with your investing goals and learning style is essential for profitable investing. For the evergreen beginners setting foot into the stock market, selecting the best online stockbroker is all the difference between frustration and a new income stream.

There is no guaranteed success in the stock market, but there is way to set yourself up for juicy investment returns by choosing the online brokerage that best suits your needs.

For beginners, you should choose platforms that offer baseline features such as educational resources, comprehensive charts and a paper trading account where you can practice investing and trading with fake money before dabbling in the market with real money. You don’t want to be on a platform that is cluttered with advanced charting capabilities, confusing technical data and conditional order options.

I will be publishing separate articles on selecting stockbrokers.

3. Gauge your Risk Appetite

Assessing your risk tolerance means knowing what your investment goals are. Are you looking for insane gains that offer high risk and high rewards? Or are you more inclined towards steady gains that offer low risk and well, less rewards?

You should have a realistic grasp of your own ability and disposition to withstand large swings in your investments. When people take on too much risk, they often panic sell, and in most instances, at the wrong time.

A general gauge is that if you are younger and have a longer timeline, or you are willing to take on heavier risks, then you can increase your risk appetite. Whereas if you’re older and have a shorter time horizon, or you’re a more conservative investor, then you can look at less risky investments.

If you’re in your 20s and are building your portfolio for retirement, you can consider riskier investments because if not your money will simply grow slowly. Coupled with inflation and taxes, you may potentially lose the purchasing power of your money that translates to low returns.

Conversely, if you are investing to save up for a short-term goal, you may want to choose a low-risk asset to invest in, to prevent selling at a loss when the time comes.

The aggressive investor is willing to invest more money given the possibility of greater returns, as opposed to the conservative investor who has a lower risk tolerance. The general rule of thumb is that money you need within the next five years shouldn’t be invested in stocks at all.

4. Diversification

Diversification is all about spreading out your risks. You do so by investing in a variety of assets or asset classes, reducing the risk of any one investment from dragging down the returns of your overall portfolio. This is where the old adage ‘Don’t put all your eggs in one basket’ comes into play.

When starting out, you may not have the required capital to significantly diversify your portfolio. Say you deposited $1,000 into your online stockbroker, you cannot possibly have a well-diversified portfolio. Fret not. At the start of your investing journey, investing in one to two companies to begin with is more than enough. When you’re just starting out, chances are you probably won’t be able to purchase individual stocks cost-effectively. As you journey along and accumulate more returns or pump more money into the account, can you then start to widen your options.

Another way to start with or maintain a diversified portfolio would be to invest in mutual funds or exchange-traded funds (ETFs). These two types of securities tend to have a large number of stocks and investments within the fund, making the holding more stable or ‘safer’ than a single stock pick.

Individual stock-picking can be complicated and puts you at a higher risk. As a beginner, you should consider sticking with index funds or ETFs, as they keep the fees low and still diversifies your investments.

I will be publishing separate articles on stock-picking and diversification strategies.

Baseline

Do your homework before engaging in any financial decisions. It is possible to start investing with a small amount of money, as long as you understand the limitations and restrictions that you will encounter as a new investor. Be prepared for a new and exciting journey, one filled with many twists and turns!

Alexander SR Pang