If you are new to the world of investment or maybe you are thinking about starting but not quite sure how to start, I just want to tell you that you don’t have to feel scared or overwhelmed. The world of financial investment can be frightening even for experienced investors.
There are however, some basic tips you could keep in mind which would help guide you as a baby investor. In this article we outline a few of them below;
- Identify your Goals: it is expected that the need to invest is preceded by another need, this could be in the form of contributing to your retirement account, or maybe you want to accumulate capital for business or save capital. Whatever the need may be, it is important you identify and set the right goals, prioritize them in order of importance and set to work. This also makes it easier to measure and track your investment journey.
- Understand your Finances: this is an important and necessary step to determine how your investment should go. It is important to understand you cash flow; you need to know how money comes in and how it goes out and how much. This would be a lot easier to do if you have some type of budget system in place. If you don’t, it could be a good reason to create one. This basically has to do with your understanding of your income and expenses. This would help you know how much money you have to start your investment journey with.
- Have a Reserve: you must have an emergency fund set aside for when you get into deep waters. That way, you could tap into it and not have to touch your investments. You do not want a scenario where you put in your money one month and take it out the next. After-all, the whole point of having an investment is to stay invested. If you don’t have enough to make a reserve, try to cut down on some expenses.
- Make Automatic Investments: when you have understood your finances and set your priorities straight, it makes it easier to follow this rule. Set aside a particular amount to automatically invest the next month, for short term investment packages. This is very important to keep in mind even as a baby investor. You can arrange this with a firm or company to ensure consistency.
- Diversify: of course, we’ve heard the common saying; ‘never put your eggs in one basket’. You have to consider market fluctuations when making investments, try to spread them as much as you can, to curtail shocks that may come. But be careful even as you are growing your portfolio. Don’t fall for deals that leave you earning less than you should. Always measure your return on investment (ROI) against the cost of investment.
- Update your Portfolio: you need to study your portfolio from time to time. Just as time changes, events and occurrences change. What is good for you today may not be the same tomorrow. It is important to be prepared for when you may need to make investment changes.
- Learn and Keep Informed: Learn, unlearn and relearn. When it comes to investment, you can never know it all. You need to stay consistently informed, with market trends and regulations. And the good news is that everything you need to know has already provided for you.
Summarily, you don’t have to be an expert or a professional investor before you start. One last tip to keep in mind is to start as early as you can, you don’t have to wait till you are earning higher. The earlier you start investing, the longer your investments can grow. Take care to avoid falling into Ponzi schemes. Always due diligence before you make that commitment. If you are still skeptical about any deal, it would profit you to consult a professional. Someone you trust to guide you through the process.