Beginning investors may be nervous to take the plunge. Since most investments carry some risk, novice investors may not want to expose their money to losses. Alexis Assadi, an investor and entrepreneur, explains the advantages of investing and gives beginners useful tips to leverage their earnings well into the future.
Read the Fine Print
The prospect of making money can be appealing, but it’s crucial to study an investment opportunity carefully. Many investments are heavy with fees and commissions, which can dilute potential returns. Reading the fine print is essential. Sometimes, the promoters or the offering, itself, may not be operating legally. At the very least, you should search for information about them with the local financial or securities regulator.
Don’t Make Emotional Decisions
Investing can be exciting and fun. But it’s easy to get caught in the hype and make investments based on feelings, not facts. Try to look at each opportunity without bias. Don’t be afraid to take your time, says Alexis Assadi.
Understand, Specifically, What You’re Investing In
Securities are complex legal and financial products. It’s important to comprehend what, exactly, you are about to buy into. Ask yourself questions, like “What is the business?”, “How does it make money?” and “How can I get my capital back?” You should be able to articulate this. An answer, like “It’s a cryptocurrency that I found online” will probably not suffice.
Start Early, But It’s Never Too Late
The earlier you can start investing, the better. The power of compounding returns can dramatically increase an investor’s gains. The longer you can stay in the market, the more time there is for your capital to grow. Contrary to popular belief, it’s never too late to start investing. There are many types of low-risk investments that are perfect for people who are nearing retirement age.
Invest With Tax-efficiency
Most investments have tax consequences. Investors can lose upwards of 50% of their profits, depending on how they are taxed. It is possible to reduce taxation or even avoid it altogether through accounts like Roth IRAs (USA) and RRSPs (Canada). Before investing, you should consider whether it’s advisable to do so through tax-sheltered programs.
Don’t panic every time a stock drops or bad news reaches the market. It’s often more important to look at the long-term trends than to be worried about the weekly or monthly gains and losses.
Follow the news and current events
Investing is a function of understanding what’s going on in the world and making decisions that could profit from it, says Alexis Assadi. For that reason, investors should be aware of politics, policy and legal events. You should follow reputable news and informational sources.
Don’t Invest in “Hot Tips”
People who claim to have inside information about a company are often incorrect or may have nefarious reasons for telling you about it. Sometimes, they are trying to promote a stock for their own gain by driving up demand. Moreover, if they truly have inside information, then it may not be legal for you to trade on it.
Know Your Long-Term Goals
Before you start investing, think about the goals you have for your financial future. Whether you’re planning to buy a house, retire, or send a child to college, your investment strategy will be different. Aligning your financial decisions with your desired outcomes is important.
It is not possible to make a “good” investment without knowing your objectives. Investing goes far beyond making money or earning a profit. It must incorporate other factors, such as your risk tolerance and timeframe.
Consider Professional Advice
Financial advisors who are licensed and regulated can guide your investment decisions. They can assess your financial situation and your objectives and can help you reach them. However, be sure to ask your advisor how she or he is paid. Your advisor should always provide direction based on what’s best for your needs, not theirs.