Investing can be very profitable and at the same time, risky. This is why you need to be grounded in the basis of investing before making an informed choice. Whether you are investing on a short term basis or going for long term returns, you need to play safe before making the leap. In this article are 4 safe tips you should consider before making any investment, especially when you are investing for the first time.
So, here are 4 safe investment tips for beginners:
- Do not put the cart before the horse: before you decide on what you want to invest in, and how much you are willing to invest, you need to set goals before investing. You need to ask yourself salient questions that will help guide your goals and investment plans. Questions like, why do I want to invest? Is it to grow my savings? Am I investing for the long haul? Am I prepared for the risks involved in investing? When these questions are answered, you can go on to make plans and create a list of investment based goals that will guide you in your investment journey.
- Look before you leap: do your research before jumping on any investment plan. Word of mouth advertisements from friends, colleagues are not enough. Do some reading on your own and study the market. Get a grasp of the common terms used in the investment market like stocks, asset allocation, bid, market capitalization, blue-chip, broker, mutual funds, book value, dividend, capital gain or loss, exchange-traded fund, individual retirement fund, personal investment strategy, etc. Having a well-rounded knowledge about what you are about to embark on helps you to make timely and informed decisions. Knowledge is power and you need to harness it before investing your money.
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- Do not put all your eggs in one basket: do not put all your money in one investment no matter how promising that offer may be. Investing in one plan may not be the right choice for you as a beginner. Making emotion-based decisions like investing heavily in one company should be put in check before embarking on your investment journey. There are many options to choose from like bonds, treasury bills, life insurance, stocks, etc. Control every urge to buy more stocks from a company than you have planned. To make your investment portfolio a successful one, investment discipline is key.
- Save for the rainy days: have emergency funds. Be prudent in your spending and investing. Do not put all your money in various investment programs that you have nothing as emergency funds in case things take an unexpected turn. No matter how juicy an investment offer seems and how tempted you may be to put all you have in it with the hope that you will reap massive returns in investment, do not do it. It is a precarious risk for an investment beginner to take. Be disciplined in how you allocate funds for investment; do not cross the allocated budget for every investment you planned to make. This is why you need to make plans before starting any investment. Saving for the rainy days will be your cushion or back up against any unpleasant surprise that may spring up in the future.
Conclusion
Investment is an important aspect of financial literacy and growth. By equipping yourself with the 4 safe investment tips for beginners listed in this article, you are on your way to building a successful investment portfolio.
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