Everyone has to start somewhere. With investing, the earlier, the better.
Many remain sceptical about it, mostly because they believe that they don’t have the expertise and knowledge needed, or they’re simply afraid of the losses that may come with it. Of course, when you’re looking at it from that angle, you’re only looking at the glass half-empty.
Shift your perspective and consider the glass to be half-full instead. What if you manage to learn and succeed at it? What if, over the years, you grow to be better at it, and your bank account is now tripled of what it was at the start? Or even if you’re not looking towards managing it on your own because you simply don’t have the time, what if you could find someone who’s qualified enough to do it for you and build you a passive income?
It’s all about the way you look at it, and so, if you’re ready to start on your investing journey, keep reading!
As a novice investor, there’s plenty for you to learn. Here’s the thing though, you’ll most probably never stop learning. As you carry on in your journey, you’ll realise that given how volatile the market is and how it constantly changes, day in, day out, that you’ll always be learning and updating your very own strategy or portfolio.
With that said, however, you must start somewhere, as we’ve said. So, here’s your starting point! Let us walk you through the basics that every beginner investor should know.
1. Set your goals
First and foremost, before you even get started, you must know what you’re working towards. A plan is at the core of everything, and when you have a plan in mind, you’ll know what direction to work in, and you’ll have a clearer idea of what to do in order to get to where you want to be.
So, what are your goals?
Are you planning to retire earlier, maybe at the age of 55? Or do you have plans to buy a property or two? Maybe, you’ll even want to travel to every nook and cranny in the world? Whichever it is, and whatever it may be, identify it and set a number as to how much you’ll need for each—at the very least, an approximate amount would do.
When you have a target set, then you’ll know how hard you have to work and how much you have to risk in order to achieve what you’ve set out for yourself. From there, you can calculate how much money you’re looking to and able to invest, and your risk tolerance as well.
2. Familiarise yourself with the types of investment products
There are many investment products out there in the market, and which you decide to choose is entirely dependent on how much you have to invest as well as your risk appetite. From stocks, exchange traded funds (otherwise known as ETFs), and bonds, each has its own advantages and disadvantages depending on what type of investor you’re looking to be.
Here’s a rundown of the most common investments to include in your portfolio:
- Stocks: an asset that represents a certain percentage of degree in a company—if the company does well, the value rises, but the opposite is true if the company falters.
- Bonds: a smaller, yet steady stream of income which are loans made to a company or government with the promise of repayment on top of interests.
- Unit trusts: a pool of collective funds of multiple shareholders that are invested in a collection of stocks and/or bonds, and it can be either actively or passively managed.
- ETFs: funds that are traded on exchanges, and they generally track a selected index.
3. Diversify your portfolio
As the famous saying goes: don’t put all your eggs in one basket. The same is true for your portfolio, which you should diversify so that your risks are managed and spread out rather than concentrated. Without diversifying, you’re effectively playing a win-all or lose-all game.
When you’re diversifying your portfolio, look into the varying types of low-, medium-, or high-risk instruments. With the amount that you’re choosing to invest, split them across different instruments!
Image: Pacific Life
4. Invest for the long run & rebalance your portfolio accordingly
Ultimately, investing is long-term. Money doesn’t flood into your account overnight, and stocks don’t skyrocket, nor do your gains double in a few days or weeks. In investing, know that you’re in it for the long run, and that while the markets are volatile and unpredictable, that you must stay strong anyway.
With that being said, you’ll need to monitor and rebalance your portfolio from time to time. Markets will fluctuate and change even as we speak, and that’s why it’s important for you to always review your portfolio to make sure everything’s in check.
Image: ETrade
No matter what, always remember to invest with your mind, not with your emotions. When markets change, you’ll want to make calm and calculated moves, rather than rash decisions. Always think twice before you make decisions because you could be headed towards a loss if you choose the wrong road.
We know though, that it can be difficult not to resort to emotional investing since it’s your own money that’s on the line. If that’s the case for you, know that there’s always the option of working with a financial adviser so that your risks and losses can be mitigated well.
At the end of the day, investing doesn’t have to be difficult nor complex. Start small and easy, and build your way up from there.
If you don’t know where to start, you can always look outwards for help. Rest assured, all of us here at JLO are ready to help you take the first step in your journey. Investing doesn’t have to be scary, and you don’t have to meet requirements before you can start. On the day you wake up and decide you’d finally like to take charge of your financial future, reach out to us and we’ll be more than glad to help you out.