Looking at the current financial atmosphere with high inflation and a skyrocketing cost of living, investing seems to be one of the surest ways of building wealth and hedging our money. Before writing this article, I did some research and found a report by Mootley Fool that suggested that 80% of young people between the ages of 16 and 25 now invest their money for a better financial future.
And according to a Financial Times article, a young man who started investing at the age of 19 made a big impact on the financial ecosystem. The US trader Tim Grittani achieved this milestone at the age of 24 by engaging in the trading of penny stocks, which are shares priced below £1 in the UK or $5 in the US. Over a span of five years, Tim, a YouTuber, asserts that he generated profits exceeding $4 million through his trading endeavours.
This prompts the question: Can we replicate this achievement as well?
Well, Congratulations for seeking answers and for taking the first step towards securing your financial future!Investing is a powerful tool that can pave the way to long-term wealth and financial growth.
However, for beginners, the world of investing might seem daunting and overwhelming. Fear not!
This article will walk you through the fundamentals of investing and provide valuable insights to help you embark on your investment journey with confidence.
Understanding the Importance of Investing
Before we dive into the nitty-gritty of investing, let’s understand why it holds such significance. Saving money in a bank account is essential, but it won’t generate substantial returns over time.
Investing, on the other hand, allows your money to grow exponentially through compounding interest and market returns.
It provides the potential to;
- Beat inflation,
- Preserve and increase your wealth
- Achieve financial goals such as buying a house
- Funding your children’s education
- Retiring comfortably.
7 Things to Note Before You Start Investing
1. Understand Your Financial Goals
The first step to successful investing is setting clear financial goals. Ask yourself what you want to achieve: buying a home, funding your child’s education, or retiring early. Defining your objectives will help you choose the right investment path.
2. Educate yourself.
Like any journey, investing requires preparation. Take the time to educate yourself about various investment options, such as stocks, bonds, mutual funds, and real estate. Books, online courses, and financial blogs are treasure troves of knowledge for beginners. Time management is definitely an essential skill to have in order better steward the 24 hours you get in a day. Find out how you can become a master of your time, in order to 10X your success.
3. Start Small and gradually
Just as Rome wasn’t built in a day, neither is a formidable investment portfolio. Begin with a small amount that you can comfortably afford to invest. As you gain confidence and understanding, gradually increase your contributions.
4. Diversify Your Investments
In her 10 tips on how to save money for rainy days, Sarah emphasised that diversification is the key to reducing risk. Spreading your investments across different asset classes and industries safeguards your portfolio from the volatility of individual stocks or sectors.
5. Embrace the Power of Compounding
Compounding is the magic ingredient that makes investments grow exponentially over time. The sooner you start investing, the greater the potential for your money to work its magic and multiply. Don’t wait for a perfect time, because that is never ever going to happen. Just start right now, with what you already have.
6. Keep Emotions in check.
Investing can be an emotional rollercoaster, especially during market fluctuations. I personally freak out when I notice that the stocks in my portfolio are dipping. When I first started investing three years ago, I struggled to stay focused on my long-term goals. Instead, I fell into the trap of closing my open positions just because it was only a click away. And although I was losing some money, that always seemed like the right thing to do. However, I have learned that selling a stock is not the right thing to do, especially because stocks tend to recover from their fall. And as the years go by, what I tend to do is just wait it out and invest more if I can. In a nutshell, avoid making hasty decisions based on fear or euphoria.
7. Seek Professional guidance.
If navigating the investment landscape feels overwhelming, don’t hesitate to seek guidance from a financial advisor. A professional can tailor an investment strategy to your goals, risk tolerance, and financial situation.
As a beginner, the world of investing might seem overwhelming, but don’t let that scare you away from making your move. Remember, investing is a journey, not a race.
Start with a clear vision of your financial goals, educate yourself, and assess your risk tolerance. Build a strong financial foundation with a budget and an emergency fund, and when you’re ready, start investing with a diversified approach.
Most importantly, be patient, stay informed, and over time, your investments will grow, and you’ll witness the magic of compound interest. Embrace the journey of investing with confidence, and you’ll be well on your way to achieving financial security and unlocking the path to lasting financial growth.
Further reading: How You Can Grow Your Money The Right Way