7 Best Investing Tips For Beginners
Updated: Apr 11
With investing on the minds of many people, especially as the holidays approach and people prepare to spend money on friends and family members, it’s important to learn how to make your money grow—and keep it growing.
Investing isn’t always easy, but it doesn’t have to be hard either; these 7 best investing tips for beginners can help you get started now.
1) Just Start to Save
Just start to save and invest to begin your journey, then understand your investment objectives. There are three types of investors: conservative, moderate and aggressive. Your choice will determine what type of investments you will be most comfortable with and how much risk you want to take on.
2) Know your tolerance for risk.
An investor's risk tolerance is his or her willingness to withstand the fluctuations in financial markets without panicking and pulling out of the market. Risk-tolerant investors can invest in volatile, yet potentially higher-return securities such as stocks while conservative investors may only invest in stable, low-risk securities such as bonds.
3) Invest in your Pension, SIPP or 401k
Invest in your pension, SIPP or 401k etc. - You need to start as soon as possible. The earlier you invest the more time you will have for money to grow and compound.
A retirement account allows you to contribute in pre-tax £/$ , so it's helpful for people to generate more growth. However, pensions have certain restrictions on withdrawals and there may be penalties if you withdraw money before age 55.
4) Diversify your portfolio
- Diversifying helps spread your investment risk. That way if one investment doesn't work out the other ones may still do well. Think of it like not putting all your eggs in one basket.
5 ) Start with index funds
Investing is hard to do well. One way to make it easier is by choosing index funds, which are professionally managed and diversified. Index funds track the performance of a particular market or asset class, such as stocks or bonds. They're low cost, easy to buy and manage, and can be a good starting point for novice investors.
6 ) Buy individual stocks
One way to do this is to buy individual stocks, which you can invest in through an online brokerage account. One major advantage of buying individual stocks is that it's possible to diversify by purchasing shares of different companies in different industries.
Another advantage is that, unlike mutual funds, you know exactly what you're getting and how much it costs. The downside is that individual stocks are more expensive than mutual funds and also subject to a lot more volatility, which means they can fluctuate wildly in value over the course of a day.
Most exchange and brokers allow margin based trading in the form of CFD trading. CFDs are one of the most popular forms of trading.
7 ) Use robo-advisors
Robo-advisors are a relatively new type of investment management services that automate many of the functions traditionally provided by human financial advisors.
They're mostly geared to people who have less than £250,000 in investable assets, and they offer low-cost, diversified portfolios with little or no account minimums.
Robo-advisors can be a great way to get started with investing because they make it easy to explore your options and compare fees without having to speak with an advisor.
Plus, if you choose one that has an IRA option, you may be able to avoid paying taxes on any capital gains.
8 ) Set up recurring contributions (Auto-investing or dollar-cost averaging)
One of the easiest things you can do to get started with investing is to set up an automatic investment plan (either as an ISA, SIPP or IRA or just using your bank account) that will take money from your paycheck and put it into a low-risk, diversified portfolio.
You'll feel more secure knowing that you're building wealth without having to make a decision or fill out any paperwork. Plus, you won't have to worry about making sure you have enough money in your account when the time comes.
You can also take advantage of pound/dollar-cost averaging by setting up monthly contributions with different amounts of cash so that you buy more when prices are low and fewer shares when they're high.