Investment Tips for Beginners – The Smart Way to Invest Your Money
We always desire to save some amount of money for investing in places that can provide good returns. An intelligent investment has the reputation of being successful. Money management is a skill and is not a simple process. There are number of considerations in the process that must be paid along with open-ended risks.
Whether you are saving for house, child's education or retirement, you need a plan to make your money grow.
1. Investors, don't listen to financial mediaIf you really want to invest intelligently, ignore the facts you hear from financial media, since many of these facts are meant to distract you towards making expensive mistakes. Even if you hear something and it turns out to be true, don't get tempted to follow it.
Before the news hits the mainstream, it has already been heard by thousands other investors out there and has lost the edge there itself.
Don't let media and trends nurture your bad investing habits.
2. An unemotional discipline pays offThe ability to manage fear and risk determines the success for the investment. There is no magic formula or short-cuts in the market for successful investment.
Avoid impulse buying. You cannot afford to be an optimist or pessimist with the numbers involved here, you need to be a realist, who analyses and evaluates the facts and figures and then arrives at an objective view. He accounts for the possibility of things turning wrong and accepts his mistakes. Yes, it's tough to be a realist.
Don't let emotions drive your investment decisions.
3. Don't follow the trends, anticipate themIf you have some money to invest, the first thing you need to know is that you shouldn't follow the herd. It's easy to lean towards the trends as we are easily influenced by public opinion. Going with the crowd would never yield good results.
Noise trading is a pitfall many traders fall for. They often get confused by the false signals sent out by the overall market trend and trading pattern. In today's market going up and down, traders should do the due diligence.
You don't want to be one among the crowd, but stay ahead of it.
4. Spend less than you earnIf you want to build wealth, all you need to do is spend less than what you earn. This sound obvious, but many people don't live by this central occupant while dealing with their finances. The wider the gap between earning and spending, the more financial success you get. The formula is composed of two connected ideas:
- Earn more: You can increase income through strategies like switching jobs, getting an appraisal or starting a small business.
- Spend less: You can reduce your spending through different forms of frugality.
The only thing between your wealth and you is the willingness to act on this enduring wisdom.
5. Know where the money goesKeeping a track of your spending is important for investment; this is the best way to stay true to your goals and budget. Use your smartphone, old-school spreadsheet or use an app like Quickbooks to keep track of your finances, so that you have a good idea where you are standing. Just write it down!
Check if the plan matches your spending reality. There are services that send you email alert when you have exceeded budget to keep you accountable.
6. Identify your risk tolerance levelYou must have heard of the phrase, "no pain, no gain" -- these words sum up the relationship between risk and reward. It's important for you to understand that any investment involves some degree of risk; however, these risks are calculated in relation to potential payout.
You need to know your risk tolerance limit, strength and weakness, since the act of investing is an emotional one for many beginners. Don't just think of the upside, but also consider the prospect of losing all the money.
For whatever reason investors lose their tolerance, they begin to take decisions tainted by emotions that are almost never good decisions.
The bottom lineIntelligent investment sounds simple but is not as easy as it seems. It is easier to achieve satisfactory results from investments, but harder to get superior results. The tactics above are some ways to invest money intelligently and can go a long way in securing your future.
By Renuka Rana