Nowadays, people have been educating themselves on how to invest in stocks. Those who have been investing long-term will probably tell you that it’s not easy— especially because there was a time when people had to work with stockbrokers who charged heavy fees and tricked them into shelling out more money for a meager income.
But today, investing is more accessible than ever. Anyone can start investing with just a little money. However, it still counts to know what exactly is investing. (Read:5 Ways to Manage Your Finances Amid COVID-19)
By simple explanation, investing is a way to set aside money while you are busy with life. You can make money from your regular work and set aside some of it to invest. That way, the money works for you and can fully reap the rewards of your labor in the future.
Here are 3 tips that you can consider if you are new to investing.
Investment Tips: Handle the Basics First
Before you even think about investing, make sure you have your everyday finances covered. That means you have to have an emergency fund and pay off high-interest debts, first.
Financial experts recommend that people should maintain at least three months’ expenses in an emergency fund in case of reduced income such as unemployment. Get rid of debts, too. The last thing you want is to sell your investments to cover living expenses and pay off debts.
Investment Tips: Set Your Goals
If you have handled your basics, you now need to know why you are investing because different goals have different investing strategies. For example, those who wish to preserve their capital and draw some income from it may opt for a more conservative approach— focusing on less risky companies or investing in bonds. (Read: 3 Financial Habits to Instill in Your Children)
Meanwhile, those who are building their retirement savings may want to have investments in stocks that have higher returns. It also helps to know your timeline so you will know if you can handle the volatility of risks and rewards in stocks.
Investment Tips: Invest Logically, Not Emotionally
It’s true that there are moments when emotions get the better of us— investments are no different. Whether you choose to invest on your own or let a mutual fund advisor manage your investments, it’s important to make sure you don’t invest emotionally.
Let your emotions and sentimental attachments to certain companies or brands go. Sure, you may want to buy shares in them but liking a company isn’t the best reason to buy its stocks. Do your research. (Read: 5 Tips For Safer Transactions Online)
Moreover, do not let the stress affect you when your portfolio’s value plummet as the stock market drops— do not make this make you pull your money out of the market. The worst market timer in the world will still outperform an investor who regularly moves money in and out of the market.