9 Investing Tips for Beginners

Highlights

• While researching is no sure-fire way to succeed one hundred percent of the time (no such way exists), it increases your chances of succeeding and gets you more familiar with the market

• Learning how to read a company’s prospectus is extremely valuable and learning how to read one will help you immeasurably in the long term

• What stocks you choose will depend on your goals to some extent. A long-term investor will likely choose different stocks than a short-term investor 

According to legendary investor, Warren Buffet, investing is putting money towards something now for you to receive more money in the future. Indeed, the whole purpose of investing is to put money into some type of assets which will reward you in the future.

But how do you start and where do you start. Well, here are nine tips to help you if you’re a beginner investor.

1. Know Your Reason 

Before beginner investors even get started, they should know why they’re investing. To use a simple analogy, it’s easier to shoot at a target when you know what the target is. There are countless different financial goals and everyone should tailor their goals both towards their own financial situation and their desired outcome.

2. Read and Keep Reading 

This tip is one of the many skills a person may aspire to have. Again, this should be done before the actual investing even begins. There are tonnes of information out there on investing and the stock markets. So, head to the closest bookstore that has books or materials on investing. Better yet, visit your public library because why spend money if you don’t have to?

Some great books to read on investing include Robert Kiyosaki’s Rich Dad, Poor Dad, Grant Sabatier’s Financial Freedom and for the millennials – Erin Lowry’s Broke Millennial.

These are a few great ones to get started but there’s a whole section of books dedicated to this subject and to be competent at something, you should never stop learning about it.

3. Research the Stock Before Buying

 This may not be the most glamorous part of investing but you’d be surprised how simply understanding a stock before you sink your money into it will put you ahead of the pack.

Many people who invest make the dire mistake of “going with their gut” or going with the advice of someone else. While adopting this method may pay off once in a while, it’s basically not much different to gambling. While researching is no sure-fire way to succeed one hundred percent of the time (no such way exists), it increases your chances of succeeding and gets you more familiar with the market.

4. Get Familiar With the Prospectus 

While this may fall under research, understanding a company’s prospectus is a skill to learn. Prospectus reading may not be necessarily entertaining, but the information provided in a company’s prospectus is extremely valuable and learning how to read one will help you immeasurably in the long term.

Included in a company’s prospectus are crucial details like the company’s earnings, profit and fees.

The reason why this is a skill is because these can be lengthy documents. Familiarising yourself with the prospectus will teach you what to look for so that you can efficiently read a prospectus in a less time.

5. Choosing Stocks 

What stocks you choose will depend on your goals to some extent. A long-term investor will likely choose different stocks than a short-term investor.

For a long-term investing, however, diversification is vital. An investor with ten carefully chosen stocks will have a portfolio with considerably less speculative risk than buying three shares.  

To help you choose your stocks, you need to determine what kind of risk you’re willing to undertake as well as the time frame you want to invest for.

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6. Put in the Work, Reap the Rewards 

There are no shortcuts to good investing. Investing with little work and research is not much different to betting on a horse.

Resist anyone trying to sell formulas or software designed to predict the market. While pattern recognition is a part of reading the market, there’s no substitute for putting in the work. The people putting in the extra effort, are the people who win.

7. Learn to Detach From Emotions 

An investor’s biggest adversary is themselves, specifically their emotions. While it isn’t necessary to separate yourself entirely from your emotions, it’s certainly necessary to be able to control them. This applies to both positive and negative emotions.

Failure to control emotions is one of the most prevalent reasons why investors buy too much, sell too much and ultimately lose money. 

8. Be Aware of the Behaviour of Other Investors 

Too much positive or negative market sentiment can often be a sign to go against the run of play.

When too many people are feeling positive about the economy and the market, it may be a good time to turn defensive.

On the other hand, when there’s a lot of fear and tentativeness in the market, it may be time to buy up.

9. Never Panic 

The worst thing an investor can do when their losing money is panic. It’s almost a sure-fire way to lose even more money. Panic develops if you pay too much attention to what media is talking about stock market amid a negative market sentiment environment. If you feel inspired to sell through panic and not rationality, you should probably hold.

Those are just nine tips to help a beginner investor get started. Remember to do the work and keep informed.