If you’ve been sitting on the fence for a while when it comes to investing, then with a new year on the horizon, now is the perfect time to finally bite the bullet and start learning the ropes to set you up for a prosperous 2024.
Contrary to popular belief, in this day and age you don’t have to be a seasoned professional to make gains through investing, grow your wealth and secure your financial future – and thanks to a new generation of trading apps like Immediate GPT, it’s easier than ever before to get started. But although such platforms leverage AI and machine learning and provide automation to make your trading journey easier, it still pays to have a thorough understanding of the financial markets and a robust strategy in place to mitigate any losses and steadily grow your capital over time.
Here, we take a look at all you need to know to get started off on the right foot.
The benefits of investing
It’s often said that ‘knowing your ‘why’ is the key to success in any endeavour, so rather than just going into your investment journey with some vague hopes of making some money, you’ll want to fully understand what it can do for you in the long-term if you play your cards right.
By putting your money into assets – which may include stocks, bonds, real estate and more – that have the potential to grow in value over time, it’s possible to make your money work for you and increase your initial investment, helping you to create wealth and financial security over time. Many investors choose to use their returns as a safety net or as a retirement fund, and whilst how you choose to use yours is up to you, the idea is to think long term and not get carried away with the idea of becoming an overnight multi-millionaire.
By making gains that are above the inflation rate, you can also preserve your funds and improve your purchasing power over time – which is an added bonus that has made trading and investing increasingly popular against the backdrop of the current economic climate.
Beating inflation: By earning returns higher than the inflation rate, your investments preserve and grow your purchasing power.
First things first
Before diving head first into your investing journey, it’s important to lay some solid foundations. The number one rule of thumb is not to invest more money than you can afford to lose, and you should only invest money that you won’t need for several years to come, as the idea is to leverage your assets’ growth over a long period of time.
Ensure you have three to six months’ worth of living expenses saved in an easily accessible account, and don’t be tempted to invest it in assets should a good opportunity arise as this will serve as your safety net.
If you currently have any debt, then pay off the highest interest ones before you invest, as otherwise, any returns you make will only be lost elsewhere.
A budget designed to help you manage your income, expenses and savings is also key and will allow you to allocate a realistic sum of money to your investments, which you should stick to no matter what.
And finally, decide before you begin your journey on what your risk tolerance is. Assets like cryptocurrency are notoriously volatile and while this can mean there are chances to make some impressive gains, substantial losses could also be on the cards depending on how you play it. So, if you’re risk averse, then you may wish to stick with more stable assets that offer smaller but more reliable compound growth over time.
Know your assets
With so many different asset classes to choose from it can be difficult to know where to begin with making your first investment, so let’s break some of the main ones down for you to make them a little easier to understand.
Stocks: When you buy shares of a company’s stock, you then own a part of the company, which can mean substantial long-term games but also place you at the mercy of market volatility, so choose wisely.
Bonds: Bonds are issued by governments, or corporations and provide a fixed interest rate, making them an option that is generally considered lower risk than stocks.
Commodities: You can invest in commodities, such as gold or oil, either directly or through ETFs and futures contracts as hedges against inflation. Gold has always been seen as a sensible investment, with gold proof coins being regarded as the best option for smaller investors into this precious metal.
Mutual funds: Mutual funds work by pooling money from multiple investors to invest in a diversified portfolio of assets which may include stocks, bonds, and other types of assets.
Exchange-traded funds (ETFs): ETFs track an index or a specific asset class but trade like stocks on an exchange, making them another good option for those looking to diversify.
Real estate: Purchasing properties for rental income or capital appreciation is another popular move amongst the world’s wealthiest investors and is a good option if you’re seeking a steady income stream and long-term growth.
Setting up for success
Setting clear goals and creating a robust investment strategy are essential to see success. It would be easy to get instantly distracted by ‘shiny object syndrome’ without these, but by setting out exactly what you want to achieve and how you plan to achieve it there will be no room for deviation from the plan, and you’ll always be able to refer back to them before making any big moves to ensure they align. Goals might be anything from creating a retirement fund to covering your children’s university fees.
As we’ve touched upon, you’ll also need to assess your risk tolerance, as doing so will help you to decide which asset classes are for you. Diversification of your portfolio is also important to mitigate any potential losses, so don’t be tempted to pour all of your capital into just one asset type.
Once you’ve done all of these things, you’re ready to begin your investment journey, so it’s time to register with an investment platform and seek the advice of a trusted financial advisor to ensure you’re setting off on the right track. Investing can be risky, but it can also bring some excellent benefits if played right, and with a long-term view in mind.
Disclaimer: Investing money carries risk, do so at your own risk and we advise people to never invest more money than they can afford to lose and to seek professional advice before doing so.
