Essential Investment tips for beginners

Educate Yourself

Before actually investing, understand deeply what an investment is.Understand different types of investments, such as stocks, bonds, mutual funds, real estate etc.

Learn more about the risks and rewards associated with different types of investments, their pros and cons, and their suitability for you.

You could read books, attend seminars, visit trustworthy websites, or even do an online course on investments to build a solid foundation.

Set Clear Financial Goals

Set your financial goals before you start to invest. You should be clear about the ‘why’ of your investments. Decide the purpose of your investments, be it for retirement, funding education, emergency fund, buying a house or taking an expensive vacation.

Then align your investment products with your investment goals.

Start Early and Be Consistent

If you start to invest early and be consistent with it, the legendary effects of compounding can be harnessed effectively.

Even if you start by investing small amounts, the consistency of your investments will allow for substantial growth over time, and help you build wealth.

Be Tax Efficient from the Start

When it comes to investing, you probably won't start out with much and may not think tax efficiency is a big deal. Recall that investing is a long-term plan, and you should take future investment value into account. If you save today for your retirement, you might have accumulated a sizeable amount by the time you reach retirement age. You might have to pay a sizable amount of tax if you haven't made investments in a tax-efficient environment, such as a retirement account.

Invest rather than speculate.

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price," remarked Warren Buffet, one of the most significant investors in history. Even though penny stocks might be quite alluring due to their seeming high return potential through "cancer cures" or "prospective oil field," you should think about the company's long-term future worth. Simply said, very small businesses may be less properly regulated than larger, international organisations, making them riskier. The idea that taking on more risk will make you richer is untrue; in a horse race, you wouldn't wager on a pony. 

Diversify Your Portfolio

As the famous saying goes, “Don’t put all your eggs in one basket”. One of the keys to investing is to not invest everything in one type of investment,product, sector or manager, but to diversify your portfolio.(Why Diversification Matters, 2023)

This will help you reduce the risk of investment and help during market downturns.

Assess your Risk Tolerance

While investing, it is essential to assess your risk tolerance. Some people may be comfortable with higher risks for higher returns while some people might prefer a conservative approach with lower risks.

So, understand what your risk tolerance is and make your investments accordingly.

Avoid Emotional Decision-making

Do not depend on your emotions for investments. Avoid making impulsive decisions based on fear or excitement.

Stick to your investment plan and keep your long-term goals in mind. Avoid acting on short-term market fluctuations; that area is for traders,not investors.

Fees and Expenses

Investments often have fees and expenses such as brokerage, commissions or fund management fees. These costs can affect your returns. So, keep these fees and expenses in mind while investing.

Compare the fees among investment options and choose cost-effective strategies that align with your financial goals.

Stay Updated

Stay informed about the current financial market and economy as well. Regularly review your investment portfolio and make necessary changes based on the market conditions.

If you are updated with the market trends, it will help you make well-informed investment decisions.

Avoid Timing the Market

Avoid timing the market based on its fluctuations. Even experienced investors struggle with market timing. So, its always better to focus on a long term investment strategy that aligns with your goals and risk tolerance.

As the saying goes, “time in the market is better than timing the market”. Words to live by!

Seek professional Advice

Using a professional for your investments is also a good idea. If you are unsure about where to invest or lack the time to follow the market fluctuations, you can have a professional help you create a personalised investment plan based on your goals and circumstances.

To conclude, investing can be a great way to build wealth and achieve your financial goals.

But this comes with patience, consistency, and long-term thinking.

Possible Assets:

1. Stocks:

Stocks represent ownership shares in a public company. When you buy a stock, you have bought a part of a company.

The returns are influenced by the company’s performance and stock prices. They can generate high returns, but are considered to be very risky.

2. Bonds:

Bonds are debt securities issued by municipalities, government, or corporate bonds.

When you buy a bond, you are lending money to the issuer for a specific time and you get interest on that amount. Bonds are considered safer as they provide regular interest payments and guarantees of the issuer.

3. Mutual Funds:

Mutual funds pool money from multiple investors to invest in a diversified portfolio.

It is handled by professional fund managers and they may charge extra fees for this. They invest predominantly in stocks and bonds, and give you a diversified holding of securities.

4. Exchange-traded funds (ETFs):

They are like Mutual funds but they trade on stock exchanges like individual stocks.

The added speed of purchase and sale is attractive to many investors, but the liquidity should be checked before investing.

5. Real Estate Investment Trusts:

REITs are companies that own or finance real estate properties which are leased out to tenants. And investors can buy shares of REITs, allowing them to earn a portion of rental income, without owning the property.

There are many other assets like gold, hedge funds, private equity, etc. which can also be explored.

Conclusion

These were some tips for investing for all categories of investors.As a beginner, it might not be easy to take a risk and invest in alternative investments and beginners might prefer traditional assets.

But if assessed carefully, one might get higher returns in case of alternative investments without a significantly higher risk.

Where to start from is based on the comfort and knowledge of an investor, and each one should conduct sufficient research to make an informed decision.

Disclaimer: Investments are subject to market risk, Please read all documents carefully and anything mentioned above is not advised and consult a financial advisor before taking any decisions.