Investing 101: 6 Robust Guidelines For The Beginning Crypto Investor
Investing your money can bring you incredible dividends, allowing you to reap passive financial gain. The hardest part about investing though is getting started, and knowing what to avoid. The sheer amount of information available regarding money in 2018 and beyond is enough to make even an avid reader’s head spin. If you’re ready to start but need some tips to prevent wasting your valuable dollars, check out this article for six robust guidelines for the beginning investor.
1. Only Invest In What You Know
With apps like Acorns, Stash, and Swell giving rise to micro-investing, especially among younger crowds, investing is available to a broader pool of income earners than ever before. Most of these apps allow you to get started with $10 or less, making it nearly effortless. Despite being so user-friendly, it’s important to remember some timeless investing advice that can keep your money growing year after year.
Most micro investing apps get you started with mixed market stocks because this investment is often considered the most stable and secure investment. Since it is your money, though, it only benefits you to become as familiar as possible with how stocks work.
Purchasing stock is the equivalent of buying a small piece of value in a given company, due to your desire to contribute to that company’s long-term growth. That happens through a company’s initial public offering or IPO. The purpose of the IPO is to raise money for the company, as this is the only time the company receives this money, not later when the stock gets traded across the market.
By purchasing company stock, you’re declaring with your money that you believe the company will profit in the long run. If other people agree with you, this is when and how you see a company’s stock price rise. Therefore, stock growth is all about the perceived value of a company. If large groups of people agree what a company does is valuable, people will purchase more stock, driving the price of it up.
Usually, investors try to purchase a stock at the lowest price possible and sell it at the highest price possible. That is to maximize your financial gain, after years or even decades of financially supporting that company from your initial investment.
If you feel stock investments are right for you after reading these paragraphs, make sure to continually do your research before you plunk down cash through a brokerage. Decide what type of investment timeline is right for your goals, and go with an investment plan that resonates with your personality and risk tolerance. Your money is hard-earned, so make sure you place it in the hands of those you trust.
2. Don’t Follow Trends
Lately, some of the most significant trends in investing include marijuana growers and industry subsidiaries, solar panels, artificial intelligence, electric cars, and cryptocurrencies. While it never hurts to read into any of these industrial and cultural outbreaks, following the crowd rarely turns out well because they tend to follow what’s popular at the expense of what’s wise.
Investing is such a complicated matter that a one-size-fits-all mindset is rarely the solution. What’s more, it’s crucial to know how much money you can afford to invest before you fork it over. A tried-and-true rule is never to spend more than 10 percent of your current net worth.
Being a trend follower is dangerous because you can lose a lot of money quickly without knowing what you are doing. The Internet, in particular, can generate a lot of hype in almost zero time just by getting a lot of people to talk about something, and if you don’t sit down to absorb information from multiple sources and make your own decisions, it’s the exchange will not be worth your money.
If something ever piques your interest, set aside undistracted time to read published, experience-backed individuals on the subject. This is the only way to avoid being influenced by peers, and make decisions that are best for your own bottom line.
3. Research Companies Exhaustively
If you’re going to hand over your money in exchange for long-term ROI, you want to make sure your money is going to a quality company. A few quality characteristics of companies worth investing in include earnings growth, earnings stability, brand recognition, and industry comparison.
Earnings growth and stability are evident in the fact that a company’s profits are rising incrementally and predictably over time. A company that takes massive financial hits is a danger zone because they are messing something up when it comes to their sales or marketing. A company that has enormous, unexpected profit gains is also a red flag because it can inflate this financial growth artificially.
Brand recognition is crucial because it shows a company has resonated with the lives of individuals, and is here to stay. Investing in a company that doesn’t at least have a niche group of dedicated fans is risky because people that don’t know and appreciate a brand is a sign its products are not efficiently solving problems. On the flipside, sharing your favorite products and services with others inevitably leads to new people becoming customers.
Industry comparison is critical because you want to know how well or poorly a company is doing for their type of work. For example, a company with a small stock price may initially seem like a bad investment, but if their rate is higher compared to those in their industry, this may be a good sign after all. The key here is to consider all factors, and only to jump onboard after you have performed some legitimate research and homework on a company.
4. Study The Greats
Household names like Warren Buffet, Mark Cuban, Carl Icahn, Charlie Munger, and John Bogle didn’t get there overnight. In fact, many of them had to spend decades perfecting their craft and knowledge to provide investing wisdom to others. Anything worth doing is worth doing diligently, and making the right decisions early on can save you thousands of dollars and years of headaches.
Ask a few trusted friends or coworkers who their favorite financial sages are, and (combined with your research, of course) dive into some of their most prominent works. Learning from people who have won legendary success in the financial field provides invaluable wisdom from which you can benefit. Use their decades’ worth of experience to accelerate your financial goals.
5. Start As Early As Possible
When it comes to investing, time can be on your side, but you have to start early. The beauty of investing is that when you start early, your money has more time to grow due to factors like compounding or increased valuation of a company.
However, having enough money to invest means you’ve already set some aside. Saving money is a discipline, but it doesn’t have to be torture. The easiest way to prepare some cash for investing is to set up a periodic withdrawal amount from your checking account. As soon as the withdrawal is confirmed, you don’t need to perform this every month manually, and you won’t be emotionally distressed, either. Studies show that when you make saving an “out of sight, out of mind” practice, you’re more likely to experience financial peace of mind and have a meaningful savings account, too.
Once you have around $500-$1,000 set aside, you’re prepared to make powerful investment moves. As shared before, use an investment firm you trust; one that has your values as part of their daily operations. Then, remember to “set it and forget it.” Market volatility will happen throughout a lifetime, but stocks have been shown to increase steadily decade after decade, regardless of temporary turmoil. What’s more, you don’t want to cash out your investments prematurely when things look rough; this prevents you from making more significant gains just a few years more down the road.
6. Mirror Those You Want To Be Like
Often, when discussing investment opportunities with family and friends, they may view your aspirations with skepticism, and this can be for different reasons. One, many individuals are risk-averse, and often see value in holding onto the money they already have, rather than investing it wisely and watching it grow.
Two, sometimes friends and family are jealous that you have spare money to invest and want to deter you from moving forward with your life. If this is the case, they are not worth listening to. It is best to avoid people who do not share the financial vision you have for your future. Even if this means attending financial conventions or networking groups that center around your long-term goals, this is better than trying to force people in your immediate circle to “get it,” because they are only likely to resist.
As you can see, investing is no trivial undertaking. Remember that even seasoned, profiting investors are always reading and discovering the latest information on what makes financial markets tick. Staying disciplined and purchasing reasonable financial vessels allows you to manage your investments at a pace that matches your goals. When in doubt, always seek advice from an expert, not from the hype of the Internet.