If you are thinking of taking your first step into financial investment, then it is an exciting time. You may also be feeling a little bit nervous and daunted by all the information you need to take in. That is perfectly natural and will soon pass once you become more familiar with investing.
Trading on the big financial markets like the FX market or the global stock exchanges is a popular way for investors to grow their capital. The world’s stock markets are worth almost $70 trillion and the biggest among them can be worth $1 trillion alone! This shows just why they are so attractive to invest in.
Simple tips for first-time investors
Investing on the world’s financial markets is undoubtedly a serious undertaking with a degree of knowledge being required if a professional advisor is not being used. However, for the first-time investor, getting the below basics right is enough to get you started.
- Find out about how the market works – this is a really key point to understand. Whatever financial market you invest in then you must first learn how it works. If you do not, then it is simply gambling and not investing! Learn what can make the market move one way or another, how to spot investment opportunities and what the different terminology means.
- Draw up a trading plan – once you have a grasp of how the market you plan to invest in works then you need a trading plan. This is especially important for new investors as it will provide the discipline needed to only invest when there is a rational reason to do so. Your plan should set out how much you will invest on each trade, what profit you are seeking, when you will exit and how you will find your trading opportunities.
- Consider a diversified portfolio – many new investors make the mistake of putting all their money into one or two companies in the same sector. If the sector itself crashes or the two individual companies do, then you are in trouble. To reduce risk it is better to diversify your investments across a range of companies, sectors and asset classes. Many investors will structure their portfolio to have a certain percentage of stocks, bonds, currency and ETF’s for example.
- Prepare for upcoming events – forewarned is forearmed as the old saying goes. This is true for investing as you need to be ready for any upcoming events that might affect your holdings. Keeping an eye on a weekly stock calendar will help you to do this. By knowing what is coming up that week in terms of reports or events then you can avoid getting caught out by them. It also gives you the flexibility to act before the event happens or be there on the day to act quickly if needed.
Don’t dive straight in
It is naturally tempting to start investing in the financial markets immediately. The desire to make money and not miss out on any opportunities is something that we all feel. It is though essential to take the above tips on-board first. That will help you make your first steps as an investor in the right way and will aid in making your investments a success.