The Ultimate Guide to Begin Investing

Over the past few years, investing has exploded amongst the masses. Gone are the days when people thought you needed to be a financial or stock guru to trade; instead, everyone with a little bit of extra cash can now join the investing game.

If you are still new to investing or you aren’t sure where to start, this guide will help you take your first steps on your investing journey.

Choose Investment Goals

The first thing you need to do is make a list of your investment goals. Do you want to make money for a holiday, do you want to create a nest egg fork for yourself or your children, or do you simply want to make a bit of extra cash on the side?

Understanding and outlining your investment goals helps you figure out what you should invest in, as well as the type of investor you will be.

How Will You Invest?

Once you have decided on investment goals, you will need to figure out how you are going to invest. While there are several options, the two mains one are either investing yourself or using a broker or professional.

Both options are brilliant for both new and seasoned traders; some prefer investing themselves as it gives you more control, while others prefer using an expert/professional, like S Money, as it takes a lot of guesswork out of the process.

Create a Trading Plan

Next, you need to create a trading plan. This can be as detailed or as vague as you want, but the goal is to create a blueprint for how you will trade. Some important points would be what you will trade, when you will trade, etc., as well as an exit strategy, such as how much your investments must be worth before you cash out.

Budget

Your budget is arguably one of the most important aspects of trading. You will need to decide how much you will spend on trading each month, as well as how much you are willing to lose each month.

While risk will be discussed on, the old adage of “don’t invest more than you are willing to lose” should be at the forefront of your mind when budgeting.

Research Investment Opportunities

There are multiple ways to invest your money; stocks, mutual or index funds, forex, cryptocurrency, real estate; the list goes on. Each comes with its own specific skills and risks, and thorough research is needed before you make a decision.

If, after researching, you are still unsure of the best option for you, you can also consult an expert. Take your trading plan and budget with you, and discuss the best options within the parameters you have set.

What Kind of Investor do you Want to Be?

If you choose the option of being more hands-on with your trading, you will then need to decide on the type of investor you will be. There are a lot of different kinds of investing, but they all fall into either short-term or long-term investing.

Short-Term

Short-term investing would be something like forex scalping or day trading. This type of trading requires a lot of time, as well as minute-by-minute research, to ensure you are making the right decisions.

While short-term investing isn’t necessarily the best option for beginnings, with the right research and patience, it can become profitable. However, be aware that there are often more.

Long-Term

Long-term is typically what most beginners start with. Long-term investments usually include things like mutual funds, stocks, and sometimes cryptocurrency and forex. Long-term investments aim to ignore small daily or weekly slumps and benefit from growth over time.

As the name suggests, long-term investing means long-term profits. You don’t cash out on a daily, weekly, or monthly basis, and instead, you leave your investment for a few years, even a decade or two, before cashing out.

Risk Tolerance

Risk is a huge part of investing and something you need to take very seriously from the start. In simple terms, risk is about deciding on how much money you are willing to lose and how willing you are to “take a punt” on something.

For example, Apple stock would be low risk as the company is highly profitable, has a strong and successful history, and has been shown to generate profits for those who invest. The same can be said for investing in the Dollar or any other type of established and successful investment.

On the other hand, a high-risk investment would be putting money into a brand-new cryptocurrency. It doesn't have a track-record of success or profits, and it is unknown how it will perform in the market. However, there is the possibility of high profits as you would have entered early when the currency was at its cheapest.

Being able to differentiate between the two is essential if you are to make money investing. On the one hand, low-risk investments are safer, but the profit generation is much slower, while high-risk investments can make you a lot of money but can lose you just as much.

Understand Diversification

Finally, another key aspect of investing is diversification. “Don’t put all your eggs in one basket” applies to investing almost perfectly, and having a diverse portfolio is one of the best ways to protect yourself against losses.

For example, if you have a portfolio that has crypto, forex, stocks, and a mutual fund, you are relatively well protected from losing a lot of money if one was to dip. On the other hand, if you have all your money in one or two cryptocurrencies, if the crypto market sinks, so does your investment.

Using this guide, investing can become far more simpler than you may think. While you should constantly be researching and improving your eye for an opportunity, this guide can help you start a, hopefully, very profitable adventure.