5 Pro Tips For Beginner Investors

by Andrew McGuinness     Jul 16, 2019

So you’ve made enough money and have a little extra on the side. If you want to make a break for wealth, merely storing your hard-earned cash into retirement accounts, or any account for that matter, might just not cut it. If you want big returns within 4-5 years, then investing might be the best option for you.

Investments are crucial to building a stable financial background. Whether you’re a beginner or a seasoned investor, below are some trading 101 that you can use to enhance your trading experience:

1. Diversify Your Portfolio

The number one rule of trading is diversification. Whether you’re trading stocks, bonds, forex, or cryptocurrency, it’s highly crucial that you invest in more than one asset. Don’t put all your eggs in just one basket -- diversify. Instead of focusing on the most popular thing on the market, look for alternatives that are proven to work just as well as the well-loved options.

Diversification isn’t limited within a market. If you’ve been a long-time investor in stocks, consider using some of your profit for cryptocurrency. Use that cash to ignite other investments and grow your portfolio.

2. Consider Tracker Funds

When it comes to investments, more specifically in the stock market, you can choose between active and passive funds. Active funds are ran by managers and brokers while passive funds are ran by computers. The latter is much cheaper than the former and can give you a much bigger return.

Experts have yet to decide which is better so it all depends on your current financial status. If you would like a passive way of attaining income and just merely want to dabble in stock, then passive trackers might be the better option for you.

3. Don’t Rely On News For Big Decisions

We like to think that everything we watch online or on TV are the gateways to a market’s secrets. As a beginner, you might feel wary of every single report you see on the news and make brash decisions according to these reports. As early as now, you have to understand that news outlets shouldn’t be the only thing standing between you and your investment.

If you hear skepticism about cryptocurrency or a certain stock, do not immediately sell all your assets. Read what the community has to say about it and reach out to other traders to see what they think. After all, news sites can be inaccurate about certain aspects of a market.

4. Rebalance Your Assets Regularly

Finding a formula that works best for you is great but that doesn’t mean you can’t ever try new things. At the end of every year, it’s important that you look through your asset allocation and see how you can improve your portfolio. Design your asset allocation according to how much risk you can afford to take VS what you’re willing to risk.

As you become more experienced in trading, you might realize that your allocations are no longer in line with your long-term goals.

5. Establish A Stable Financial Status

This is an advice that often goes unheard precisely because people think investments are going to magically change their lives. It’s important that before you get into an investment, you must establish a sound financial status. This means clearing up any debts and working up a savings account to finance unprecedented events.

Don’t treat your capital as your one-way ticket to riches. More importantly, don’t use money you can’t afford to lose. While investments are all about taking risks, simply gambling your entire fortune on a stock or on a currency isn’t the wisest decision.

Investing has never been easy. It takes a lot of hard work, determination, and patience. But with the right mindset, anyone can turn thousands into millions.

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