Decided to invest your money? Great! But are you sure you’ve decided exactly what you want to invest in, are ready to manage your risks effectively, and probably know what instruments are best suited for you?
If there’s anything you’re not sure about, right now we’re going to tell you the main things to keep in mind before you invest even $1 of your money.
Determine your goals
Let’s agree right away… Forget once and for all the myth that you can become a millionaire with only $10 in your pocket. Yes, you can use the leverage of a broker, but you will most likely lose that money very quickly.
Achieving your goal must be clear, measurable, achievable, and have a specific time frame. For example, you start investing $1,000 and plan to make $500,000 in 3 years by investing in blue chips is a goal. But “I want a million dollars and right now” is definitely the wrong goal.
Determine a realistic time frame for achieving your investing goals.
After all, this will directly determine what trading method you will use and what assets you will invest your money in. If you want to make a quick and frequent profit, then you will be able to do so. You will be able to take even small gains, but very quickly. Let us tell you right away that this method is not suitable for beginners because of the high risks and the need to react to changes in the market situation very quickly (and therefore more likely to make mistakes).
If you don’t want to shake out of fear and watch the market every minute, then choose long-term investing. Invest in stocks of well-known companies, but prepare to forget about profits for several years. Instead, you’ll be investing your money while experiencing the magic of compound interest. By the way, it’s long-term investing that tends to yield the best results.
And choose a reliable and fair broker. The choice of the broker can have a big impact on your trading results as well. One of the leading market makers in the trading industry is Exness company. If you become its client you´ll get access to a comfortable trading environment, as its loyal client you will have an opportunity to participate in the Exness Loyalty Program.
Learn how to manage your risks
This quality is sorely lacking for newcomers. They perceive financial markets as a casino game, trying to become millionaires in just one day. It doesn’t work that way. You must prepare for the long run and effectively manage your risks and make sound investment decisions.
You should never invest all of your capital in one asset, no matter how attractive it may seem. No investor can predict with 100% accuracy what will happen on the market next, and even Apple stock can plummet.
To protect yourself from risk, invest no more than 5% of your capital in any one asset, and remember to diversify. By investing your money in different assets, you will be able to compensate for losses from a fall in the value of one asset at the expense of an increase in the value of another.
It would be great if in addition to stocks you would not forget about other opportunities, such as investing in exchange-traded funds, metals, and so on.
Which assets are best for beginners?
Many novice investors forget one important rule: the higher the potential profitability of an investment asset, the higher, as a rule, the risks of losing all the money.
Beginners invest their money in bitcoin, the volatility of which is off the charts. Today bitcoin rose by 10,000 dollars, and tomorrow it will fall in value by 20,000 dollars. In general, cryptocurrency is not an ideal option for a beginner investor. If you do decide to work with cryptocurrencies, take a closer look at Stablecoin, particularly USDT. Unlike other cryptocurrencies, these assets are backed by fiat money, metals, and, of course, the U.S. dollar.
Still, if you’re just planning to make your first investment, the best way to go about it is:
- High-yield savings accounts. You’ll generally get more interest than you would in a regular savings account, and you’ll always have access to your money.
- Certificates of Deposit (CDs). The interest on this instrument is not as high, but you choose the length of time you invest your money. You can buy a CD for six months or five years. The advantage of such deposits is their high safety.
- Mutual funds. These funds allow you to invest your money in a basket of stocks or other assets. It is very often difficult for beginners to compile their own investment portfolios, so mutual funds make this task easier for them.
What to choose: trading or investing?
To answer this question, you first need to assess your risk tolerance as well as the income you plan to generate. While trading allows you to close trades faster and make withdrawals faster, it is riskier and requires a lot of patience, quick decision-making, and market analysis.
As for long-term investing, you will not have to monitor the market constantly, and your work will be less emotional. At the same time you will be able to reinvest your profits, increasing your income.
It is up to you to decide which of these ways of investing suits you best. The main thing is to always remain calm in any situation, even when the market goes against you.