If money makes the world go ‘round, then investment is the fuel which powers it.
Nowadays, there are an incredible amount of investment opportunities available to the average investor, and almost anyone can get involved at some level (even pension schemes are an investment).
To those who are inexperienced with markets and market behaviours, the world of investment can certainly seem daunting, especially with so many so-called ‘experts’ touting their market prophecies on a regular basis. As such, here are some of the ways that novices should approach investment.
Caution
There are no two ways about it; investment is a risky game at the best of times. Despite many people claiming to know golden, fail-proof investment strategies (which they will often only share for money), no one ever truly knows how a certain market will behave, and volatile markets in particular tend to be very risky to invest in (whilst providing higher potential reward).
As such, all investors starting out should make sure that they are cautious, and do their own research before ploughing money into their desired market. This caution could well save them a fortune in the long run.
Portfolio Diversity
Another wise way to avoid the pitfall of taking on unnecessary investment risk is to create a diverse investment portfolio, filled with assets of varying types and risk levels. This means that an investor could, for instance, include a highly volatile asset, such as a share in a fledgling technology company, and a very safe one, such as gold.
You could also explore the idea of diversity within an investment category. Real estate is the perfect example of this. A lot of property investors will invest funds in multiple types of properties to spread their wealth and enjoy different income sources. You have some properties that you flip for profit right away, and others that generate steady revenue through renting them out. Having lots of properties also covers your tracks if one investment might fail. Your rental property is unoccupied and losing money, but you have others that pick up the slack.
No matter which way you approach it, having a diverse portfolio is likely to bring more joy and success in the long term compared to a very narrow, riskier portfolio.
Advice
Perhaps one of the most useful resources available to investors is financial advisers. These specialists make use of expert data analysts and advisors such as Hymans Robertson, to ensure they have all the up to date market information they need.
They can help inexperienced investors to choose the right investments for them, allowing them to experience much higher chances of success. They do, of course, cost money, so it is best to do some research and make an informed decision on the benefits of using one.
Investing is an exciting and often rewarding venture, so long as the risks are properly managed and only disposable money is used. Research is a must, but once experience with different markets has been gained, investors can enjoy a much greater chance of success in their pursuits.
For more investing articles check out the Investing articles here on Magical Penny
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