As Aristotle said: «The beginning seems to be more than half of the whole». His words are still of interest. When you are involved in any business, the greatest challenge is to take the first step. We fear the unknown. We are afraid to make a mistake. And we give up without taking a single step. In this article you will get a clear step-by-step plan for starting investors. We’ll figure out where should you start investing and how he should do it efficiently.
What is investing?
First, let’s get a clear picture of the stock exchange and know more about the term «investing».
Investment means that a person allocates his funds to save them or gain. The individual, investing his money into securities, is referred to as an investor. Investing does not require having a subject-oriented economic education. The physician, teacher, and builder can become a successful investor. There are no age limits. Both students and pensioners can get income from investments.
There are a lot of ways you start investing on the stock exchange. Some of them do not require deep knowledge of financial markets, the other ones are available for professionals only. Let’s consider the most popular modes of investment:
- Investing in stocks;
- Investing in bonds;
- Investing in precious metals (gold, silver, platinum);
- Investing in exchange-traded fund (ETF) or mutual funds;
- Purchase of currency;
- Investing in derivative financial instruments (futures, options, swap, and others);
There are two key investment styles: passive and aggressive. In the first case a person invests in the stocks of particular companies for several years. Usually tech and basic materials companies are preferred for passive investments. This is much more safe because as a rule the stocks of such companies do not take a nose-dive.
Aggressive investing means that an individual invests in riskier tools like small companies and IPO, for instance.
Now the investors also can take advantage of an offer from investment companies or special services.
This saves time greatly. For instance, a lot of firms offer trust management for their clients’ assets. You deliver your funds and experts develop an investment portfolio and take their commission in the form of a percent of the earned profit. Another way to save your time greatly is to use copy trading services. They allow the users to invest following transactions of successful traders. You will not spend your time for analyzing – just copy any trading strategies of the skilled traders.
5 steps to start investing
- You should decide on your goal.
First, you’d better answer a question: «Why do I invest? ». I want to save enough money to launch my own business or buy real estate. I want to have a monthly passive income or provide for old age. You will develop your strategy and choose the components for your investment portfolio in accordance with your goal.
For example, you decide that in 10 years you’ll buy a real estate priced at $ 700 000. To do this, you should save up no fewer than $ 5 000 monthly and reinvest the earned profit.
Also, you can divide your key goal into little ones. For instance, I must increase my deposit to $ 50 000 by the end of this year.
- You should create a startup capital.
On the stock exchange there is a golden rule: «The bigger deposit you put down – the higher profit you may get». If you only have investment on your mind, start saving up your money right now.
How can you save up your money for a start easily?
- You should maintain records of income and expenses. You may save up the money, which you usually spend on bad habits or impulsive shopping.
- You can apply an automatic withholding. Most banks deliver such an option as an automatic withholding. You may choose a particular date and amount which will be transferred to your savings or brokerage accounts monthly.
- You should grasp the basics of stock exchange.
Unfortunately, if you want to earn a high income, this is not enough to understand the meaning of the word «stock» or know the current price of bitcoin. While your graphic skills will be of help!
If you decide to invest by yourself, you should be ready for continuous training which requires a lot of time and effort. Though, the result will be worth the effort.
First, you should get the basic knowledge of the stock exchange. What is the difference between stocks and bonds? What is the right way to make deals? What tools can be used to invest in?
The next important step is development of an investment portfolio. How can you diversify it and why should you do it? Should you consider a passive investment such as art investment funds?. What does stagnation mean and how can you come through it unscathed? Before you get your expected profit, you should answer the above questions correctly.
Then, you should continue with foundations of technical and fundamental analysis. If you want to choose the profitable securities, you should take effort. The investors, who act under a principle of “what if I have luck”, often lose their deposit and pay extra money as a commission of a broker.
Usually beginners go to various training centers. The information that can be found over the Internet is usually falsified or just inaccurate. In training centers, the experienced experts work. They teach the exact theory and provide tasks to practice.
- You should choose a broker / investment company / social trading service / automated platform.
Modern technologies are widely used in investment. Now investors can open brokerage accounts, automate trading and even copy the trades of successful traders.
The most popular brokers are:
- Interactive Brokers;
- JP Morgan;
The most popular social trading services are:
- You should monitor the market.
If you use social trading services or trust your funds to an investment company, you can relax and sleep with a calm mind.
But if you invest by yourself, you are expected to analyze the market all the time. The financial market is volatile and we cannot guess a price for stocks of a particular company in a week. Needless to say that a year’s, two years’ or ten years’ time is even more unpredictable.
Any event can impact a stock price. For instance, on 21-st May, 2019 in California during a court hearing it was found that Qualcomm groundlessly overvalued their commission paid for licenses they gave for their technologies. The company took advantage of their market dominance in the segment of 5G chips for smartphones. In such a way, they tried to remove competitors, for example, MediaTek which was equally popular. The court held that the company must sell the licenses for chips production at the market price. On 22-d May their asset prices decreased by 11% almost.
Here is another example. In 2013 the Twitter account of Associated Press was hacked. Then hackers hacked the news blog and released a duff report with information that Barack Obama was detonated. In several minutes the market fell by $130 billion. Soon the situation was taken under control. There were lucky investors who managed to get rich from this.
A successful investor must always stay up-to-date with the modern world. In order to stay tuned for more news, you can:
- Monitor the news. Follow the hot current news provided by TV news channels or social media. It will be beneficial for you to be able to make forecasts by yourself, compare the events and their impact on an economic situation on the market.
- Look through blogs of investment companies. Usually such companies provide publicly available market reviews weekly or they release the information about the key events.
- Look through blogs of private traders.
- Subscribe to the paid analytics. Usually investment companies or marketplaces provide such services.
Thus, passive income generation is not gambling. Investing is a set of particular steps, while a successful investor is a person with a particular set of skills. You should start your trading on the stock exchange with goal setting, creation of a startup capital, and training. If this article is of any help for you, please, share it with your friends on social media. Probably, it will help them to decide on investing and take the first step on their way to their financial freedom.