As a novice investor, it can feel unsafe to start looking around for places to invest your cash. However, the quicker you become comfortable with the idea and process of investing, the easier you will find it to make profitable gains. Here is a fresh look at the questions you need to answer when getting started with investing.
How Much Help Do You Need (or want)?
It has never been easier to find resources related to investing, and likewise, it has never been easier to download an app and get started with investing.
At the same time, all the “old school” avenues like stockbrokers and investment managers are still available to help you on your investment journey.
How Much Do You Want to Invest?
Many people ask how much they should invest, but too many variables influence the answer to that question. Better questions to ask are how much you want to invest and what your overall investment objectives are.
A good starting point is to settle on a fixed amount of cash you want to invest in every month, and some people go beyond this and invest all their spare money monthly. Whatever your approach, you need to start from a position of regularly investing a specific minimum value.
You might want to link the amount you invest to your age. For example, if you’re in your early 20s, you can invest as little as a few hundred dollars per month and see that build into something significant in the coming years. If you’re older and investing for the first time, you may want to look at investing more substantial sums of money.
Where Do You Want to Invest?
While the best long-term approach to investing is to have a diversified portfolio, you might decide to focus on just one or two options when first getting started.
These might include:
The stock market is a natural starting point for many investors, with stocks known historically for providing long-term value and wealth creation. However, if you plan to invest in stocks, you still need to consider the types of stocks you will commit your cash to, whether you look at options like small-cap stocks, forex trading, or investing in specific industries.
Investment bonds can be an excellent investment if you’re looking for something relatively safe for your first investment activity. However, bonds can limit returns in comparison to stocks.
Assets and commodities like gold are popular with investors because they hold their value even through challenging economic periods. However, these might be something you diversify into later rather than focusing on them as a first investment.
Index funds allow you to invest in a collection of stocks across a specific index or industry rather than buying stocks in particular companies. Indicies can be a great way to build some diversification into your portfolio, albeit your investment is tied to one index or market’s performance.
Crypto assets like bitcoin and ethereum. Investors can invest in a broad range of virtual assets to diversify their portfolios in these ever-growing asset classes. The most common investment strategy for crypto.
What Are the Best Routes for New Investors?
It all depends on what you are comfortable with. If you’re looking to start investing with just a tiny amount of cash, then small-cap stocks are a potentially worthwhile investment. These have the potential for high growth but may be volatile in the short term, so you need to be comfortable seeing your investments fluctuate in value.
While it can be tempting to invest in “safer” investments like bonds when starting, the low returns on offer can mean you don’t grow your wealth once you take inflation into account. If you’re unsure where to start, speak to a financial advisor about your options.
Which Investments Deliver the Best Returns?
In the long run, investing in stocks is the best way to grow your wealth. However, depending on your investment objectives, you might decide to go down other avenues in the short term.
You might also wish to combine investments in the stock market with shorter-term investments as a means of diversification. Speak with a financial advisor to decide your objectives and develop an investment strategy to help you meet these in the coming years.
