Investing is a tricky business; you can gain big and also lose a bunch of money really fast. So to avoid any major losses, it’s important to know how to invest, and the best method to do it, which is why we created this tips about investing for dummies.
Investing, if done right, can make you gain a lot of money without even making an effort, so it’s a very attractive option, and on top of that, you are also contributing to a project that may (and you better hope it does) become something huge.
So with this being said, let’s jump with some tips to have a good experience in the financing world. Follow this investing for dummies tips.
- Know your financial goals and risk tolerance to choose investments with a level of risk that fits perfectly with your profile. Take your time and compare alternatives to find the best fit. Never invest in products that you do not understand.
- Seek professional advice for making investment decisions, but remember that the ultimate responsibility is yours. To avoid disappointment, maintain contact with your broker and determine the scope of their responsibilities and freedom to act, and their style and philosophy. You need to know your broker as the palm of your hand.
- Eliminate debts by paying high interest rates and sanitize your current financial situation before making investment decisions first.
- Execute long term investments. Markets rise and fall, there will always be ups and downs, but in long term investments there are usually more ups than downs. Know how stay on the course and do not be distracted by the daily variations.
- Beware of costs! Compare well the fees and commissions of each entity. It can make a huge impact on the final return of the investment. This is one of the aspects many newbies fails in. Investing for dummies command: ALWAYS KNOW THE COSTS.
- Avoid excessive operations in an attempt to “beat the market”. Today it is relatively easy to make speculative investments, buying and selling at very short notice over the Internet and operate in markets previously reserved for experts. However, just to be clear, it is not recommended.
- Start investing sooner rather than later. Of all the factors affecting the accumulation of capital investment – initial amount invested, amount of contributions, profitability, while investment remains – the most important factor is time.
- Avoid guru shift and making emotional decisions. Do not chase yesterday’s successes. Past performance is no guarantee of future performance. Nobody knows what markets will end up behaving. Discipline and patience are important features for the small investor. Fear and greed are their enemies. We must avoid “buying high” when markets live euphoric moments and “sell cheap” in times of crisis.
- As for discipline, it is recommended to make periodic and regular contributions, whether or not it is a small amount, rather than waiting for what may seem opportune to invest larger amounts.
- If someone offers you an investment “too good to be true” most likely it is not true. Never trust strangers who offer unsolicited advice on investments. The CNMV has a publication on “boiler rooms” worth reading. Never compromise your money without understanding the investment and the risks involved, and remember that there is no risk-free return.