By Olamide Fred-Ahmadu
There is no denying that the world of investing may be extremely complex for new investors. If you are thinking about investing, we can thank the financial jargon for your lack of clarity regarding where to start and what to invest in.
Many people are impatient to get started investing right immediately, and they move quickly. However, they can soon run into financial difficulties. Additionally, there are similarities between investing and gambling in that making a wrong bet can cause you to lose all of your money. All of this happens as a result of a lack of understanding of investments.
Thankfully, we can assist you and have some financial ideas to lighten your load and give you the power to control your course. Here are 10 pointers to get you started in the world of investments.
Start investing early
If you haven’t jumped in yet, what are you waiting for? If you’re in a position to do so and are willing to face some financial risks, now can be a great time to start investing. If you extend your investing journey, you may miss out on some positive progress, which is not ideal if you want to maximize your potential profits. If you want to make the most of your financial trip, it can be worthwhile to give in to your FOMO’s pressure to invest. Consider starting an investment portfolio as soon as you can because your money may grow more quickly if you do so.
Set investment goals
If you’re just starting out on your investment journey, there are many different assets available to build your portfolio, so it’s important to decide what you want to invest in. Even while earning money is surely your ultimate goal, each individual has different needs. Considerations include income, capital growth, and capital safety. Consider your age, your circumstances in life, and your financial status as well.
Be tax efficient from the start
Most likely, you’ll begin investing with a small sum and may not give tax efficiency any thought. Remember that investing is a long-term strategy, so consider how much your investments might be worth in the future. By starting your retirement savings today, you may have accumulated a sizable sum by the time you are prepared to retire. If you don’t invest in a tax-efficient setting, like a pension, you may end up paying a considerable amount of tax.
With any type of investment, there is a risk. Investment risk is the point at which there is a difference between the expected return and the chance of a true gain. Consider putting N10,000 into the stock market with the expectation that share prices will rise by 20% this year. The share price has decreased -by 5%, though. Risk is the likelihood that the result will be different from what is expected.
Each investment involves some level of risk. For instance, there are two different types of investments: stock market investments and bank certificates of deposit. Because there is a potential that the profits won’t be as expected, investing in the stock market is often riskier than investing in a bank certificate of deposit. However, high-risk investments often have the most potential for profit.
Your risk appetite is referred to as your level of investment risk acceptance. The best recommendation from experienced investors is to balance your investment portfolio. Your portfolio should comprise a blend of high-risk, medium-risk, and low-risk investments, depending on your level of risk tolerance, to even out return swings.
5. Consider diversifying your portfoliogardless of your investment approach, it is always a good idea to try to lower your risk. You may diversify your portfolio and lower your chance of losing money by dividing your money among different investment types and regions. Think about this. If you invest all of your capital in one or two companies, you can be in for an unpleasant awakening if those companies struggle. Now, the risk that you will lose all of your money will diminish if you buy a variety of investments of various categories (such as shares, bonds, and property) and invest in multiple financial markets.
Unless you’re looking for a specific recurrent income from your investment, you can think about reinvesting any capital from funds or dividends back into your investment portfolio. Reinvesting stock dividends has historically been shown to greatly increase long-term gains.
Control your emotions
One of the most important characteristics of stock market investing is emotional control. How the market perceives a corporation can be inferred from the price of its shares. For instance, the price of stocks and shares will decrease if the majority of investors are pessimistic about the future of a certain business.
As stock prices fluctuate, investors become nervous and anxious. This leads to decisions on whether to sell their investments to limit losses or to stick to them in the hope that prices would increase again. Since emotions frequently serve as the catalyst for action, it is critical to ensure that all pertinent factors are carefully taken into account before making a decision.