5 “Must knows” before you start investing
Investing is something that as young people we want to be doing it sooner rather than later. But before you dip your feet into the world of investing, here are 5 “Must knows”:
1. You don’t have to be an expert to invest
You don’t have to have a lot of money or know the game inside out to be an investor. It’s possible to invest through your employer’s pension scheme, a wealth advisor or even through online/app-based platforms (more here). That way you can chill at home whilst someone else does the hard work for you. In terms of how much money to invest, there are platforms that allow you to invest from as little as £1 a week, which is great if you’re new to the world of investing.
2. No such thing as a “Sure thing”
In life we all like guarantees. The prime example of this is saving as we can put our mind at ease knowing that our money will be there tomorrow. However, when it comes to investing you sacrifice this “guarantee” for an opportunity for your money to grow faster than it would in a typical savings account. Anything can happen in the world of investing which is why your money can go down as well as up. As your investments become more risky the chances for a high return increase but at the same time the chances of making a loss increases too. If someone offers you an investing opportunity that is a “sure thing” be wary, as this is just a way for him or her to make money from you.
3. Nothing comes for free
Depending on the method and platform you use to invest, its highly likely that there will be charges each time you buy/sell investments or for the management of your portfolio. These fees can eat into your profits so make sure your comfortable with the charges. Do your research.
Things that we read and see can have an impact on our emotions, which can very easily influence our decision-making. Hype and buzz would cause us to excitedly increase our investment and buy, but if things were going terribly we would sell and take out all of our money. The aim is to try and avoid knee jerk reactions and stick with a strategy in order to avoid moving money at the wrong time. Having a diversified portfolio (i.e. different types of investments) will help to reduce these emotional responses.
5. Invest in what you know
If there’s a particular industry or company that you are quite familiar with, this could be a good start for where you decide to invest. Personally, I know nothing about the biochemical engineering industry so if someone told me that XYZ Ltd. are doing big things, it would take me a long time to research and understand what the hell they do and if they are a big bet. However, if I worked in the retail & fashion industry I would have a better idea about the companies who have a big future based on their market position and potential. This would be an ideal place for where I could start.