Investments are an intimidating concept and the stock market can be an extremely volatile environment for beginners. However, it should not discourage you from investing in it altogether as in time, you will understand how the market works. It may not be possible to figure out the ins and outs in a couple of days. However, with practice and a steady investment portfolio, you will be able to recover more from your initial investment. Here are a few things to consider before you buy your first share or stock. Understand the difference Often, people confuse the terms of trading and investing. Note that these terms cannot be used interchangeably as there is a stark difference. You invest in shares for the long term and trade in stock, gold, currency, and various commodities for the short term. Investing is a steady process and you will reap the benefits of the portfolio in the near future. Trading, on the other hand, is done to maximize short term gains. Investing can be a passive income while trading is your active source of income from the stock market. Investing style Find your niche before investing. Making those big bucks will not be possible if you don’t understand what to invest in and how much is it worth. Once you recognize the difference between investing and trading, identify the best portfolio to invest in and the top stocks or commodities to buy now. For example, an investment in gold and foreign currency will witness daily fluctuations to make money in the short term. Alternatively, investing in a diverse portfolio through mutual funds will generate systematic and steady income with a minimum risk portfolio. Open a brokerage account Investing and trading both require a brokerage account and a broker to facilitate the transaction. Online brokerage accounts provide quick access to your portfolio enabling you to buy and sell whenever you please. The alternative to active investing with a brokerage account would be to open a Robo-advisor account. Based on your investment goals, a Robo-advisor account will configure your portfolio accordingly to achieve those goals. A fee is applicable for the automatic investment option to benefit from these lucrative asset management services. Limit your investment specifically Investing blindly is a recipe for disaster. Understand that having a diverse portfolio is a good idea. But having one without a set investing limit will not translate into the rewards you expect from your investment. It is not always the case that the more you invest, the higher will your profit be. Note that the share price and the number of shares purchased determine the total value of the portfolio. Also, Exchange-Traded Funds offer you the flexibility of investing with a considerably small budget. While mutual funds may require a minimum $1000 investment, ETFs can be purchased for just a couple of hundred dollars. Financial freedom Having cash tucked away for a rainy day is a wise option. However, simply saving will not grant you the financial freedom you long for as you progress further in life. Reinvesting the savings is the way to go and the sooner you start, the more money you will have to double your initial investment.
