Investing in stocks and shares is an excellent way to get your money working for you. Investments have the potential to provide you with a return on your money many times greater than simply leaving your money in a savings account at your bank.
However, investing does carry an element of risk, which is why most people avoid it altogether. However, with a little bit of education, and some careful research, you can take steps to ensuring that your investments turn out to be good rather than bad the vast majority of the time.
1. Research, Research, Research
You woldn't buy a car without checking over its service history, and you wouldn't buy a house without having a full structural survey done. Similarly you shouldn't invest in a company without checking out its history, its financial health, and its future prospects.
Thankfully, researching a company is a relatively painless task. With the internet, you have access to stock prices, financial reports, and expert analysis, much of the time at little or no cost. Despite its simplicity, this research can quickly help you determine whether this would be a sound investment or a potential disaster.
2. Don't Put All Your Eggs In One Basket
Putting all of your money into a handful of companies can be a very bad idea, particularly if they're in the same or similar industries. What if that industry has a downturn? Suddenly you find that your portfolio is worth just a fraction of what you paid for it.
Although this may seem obvious, it is a mistake that is made time and time again. To reduce the risk of all your investments plummeting at the same time, you should put your money into very different companies across a range of industries. Of course, you should only do so after performing the necessary research - you want to choose only strong companies after all!
3. Get Someone Else To Do It For You
If the thought of picking and choosing your own investments sounds overwhelming, then you're probably not quite ready to go it alone. Instead, consider putting your money into one or several professionally managed funds.
These offer the benefit of an experienced eye watching over your stocks, and a good fund will be well diversified to minimise the risk to your money. Starting off by investing in a managed fund is an excellent introduction to investing, as you can follow your stocks' progress without the responsibility of choosing them yourself. Your fund manager will also send you regular updates, which can provide an excellent education on what to look for in a good stock.
Although investing can be a daunting prospect, it can also be a lot of fun. If done properly it is also a lot less risky than some people will have you believe. Start out small, with an amount of money you can afford to lose, and focus on learning all you can about this fascinating subject.
However, investing does carry an element of risk, which is why most people avoid it altogether. However, with a little bit of education, and some careful research, you can take steps to ensuring that your investments turn out to be good rather than bad the vast majority of the time.
1. Research, Research, Research
You woldn't buy a car without checking over its service history, and you wouldn't buy a house without having a full structural survey done. Similarly you shouldn't invest in a company without checking out its history, its financial health, and its future prospects.
Thankfully, researching a company is a relatively painless task. With the internet, you have access to stock prices, financial reports, and expert analysis, much of the time at little or no cost. Despite its simplicity, this research can quickly help you determine whether this would be a sound investment or a potential disaster.
2. Don't Put All Your Eggs In One Basket
Putting all of your money into a handful of companies can be a very bad idea, particularly if they're in the same or similar industries. What if that industry has a downturn? Suddenly you find that your portfolio is worth just a fraction of what you paid for it.
Although this may seem obvious, it is a mistake that is made time and time again. To reduce the risk of all your investments plummeting at the same time, you should put your money into very different companies across a range of industries. Of course, you should only do so after performing the necessary research - you want to choose only strong companies after all!
3. Get Someone Else To Do It For You
If the thought of picking and choosing your own investments sounds overwhelming, then you're probably not quite ready to go it alone. Instead, consider putting your money into one or several professionally managed funds.
These offer the benefit of an experienced eye watching over your stocks, and a good fund will be well diversified to minimise the risk to your money. Starting off by investing in a managed fund is an excellent introduction to investing, as you can follow your stocks' progress without the responsibility of choosing them yourself. Your fund manager will also send you regular updates, which can provide an excellent education on what to look for in a good stock.
Although investing can be a daunting prospect, it can also be a lot of fun. If done properly it is also a lot less risky than some people will have you believe. Start out small, with an amount of money you can afford to lose, and focus on learning all you can about this fascinating subject.
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