When it comes to investing, if you have no idea what you’re doing, you’re very well may end up losing a lot of money. Becoming successful with investments isn’t an overnight thing; it takes a great deal of studying the market and understanding how everything works. For those first time investors out there, here are a few tips.
Understand the Market and Stick to What You Know
It’s important that you take business classes to help you understand how things work. This will require at least a semester of studying. The University of the Potomac has a wide selection of business classes that will help when it comes time to invest. There’s also a ton of articles and books dedicated to investing.
When you invest your money, stick with what you know. For example, if you work with technology, stick with technology companies. Never invest in something that you know nothing about just because you think it’ll surge. Blindly investing in things will get you nowhere.
View Things Long-Term
There’s a lot of risks associated with investing, and if you’re in this for pure profit, you’ll be sorely disappointed. That being said, if you invest in things for the long haul, you will likely see better results. Things take a while to grow, and investments are no different. You should be prepared to hold on to your investments for at least five years.
Diversify and Globalize Your Portfolio
Rather than placing all of your proverbial eggs in one basket, spread out your investment. By diversifying your portfolio, you’re strengthening your investments. If one fails, the other will make up for it. A great balance to your investments is crucial, and you’re more likely to have success. Also consider investing in multiple asset classes.
Diversifying your portfolio is the best option, but globally diversifying it is ideal. Different countries have different economic strengths, so you may have more luck with an investment in an emerging economy versus an investment domestically. There’s a number of technology based specialist funds that you can invest in, such as AXA Framlington Global Technology Funds.
Freeze Your Emotions
This one is extremely important. When it comes to investments, you have to understand that things will go up and down. They’ll reach new highs, and they’ll dip to new lows, but the important thing is that you don’t have a knee-jerk reaction to it. React with what you know, not with how you feel. Reacting based purely on emotion is a great way to lose a lot of money.
Avoid Popular Choices and Don’t Pay Attention to History
Just because a ton of people are investing in a certain thing doesn’t mean it’s a great choice. Remember the dot com crash around the year 2000? Use your training and knowledge and invest for the long haul. Stick with what you know and invest in things that you feel will turn a profit in a few years.
The performance of the thing you’re investing is not an indicator of how the investment will perform in the future. Researching the history of an investment and investing based on the history alone is an extremely risky move and will likely make you lose a lot of money. You should invest with no expectations of future performance based on history.
Even if you’ve had all the training in the world, getting help from a professional would be a great idea. Stockbrokers or certified financial planners will be able to solve any issues that you have and can assist you in building up your portfolio.
Investing isn’t easy. It’s extremely unlikely that you put your money in something and see an immediate return. If you use these tips, however, you’re going to be infinitely more ready than a lot of other first-time investors. Can you think of any other tips you’d give to first-time investors? Did you have any luck the first time you invested? Leave a comment below and let us know.