When I published Money-Smart Millennials in 2016, many of my friends and readers started asking questions about investing. I must admit, I wasn’t an expert when it came to investments and I’m still not today. Many have tried investing in the stock market and other avenues such as real estate and as you’ve probably realized yourself, success is accomplished only by those who have figured out some tricks, whether simple or complex. Since 2016, I have decided to look more into the stock market and do some investment myself, however on a lower scale. Consequently, I have learned some aspects of investing which I clearly was clueless about before.
Many may argue that learning how to invest your money is an important life skill but let me suggest that you don’t have to do it all on your own. There are professionals out there who specialize in putting your money at work for potential profitable returns. Investing is a way to get a higher return on your money, but it can also be a gamble. Starting small and being as knowledgeable as you can before you regret it is essential. Here are a few things I think you should know.
There Are Different Types of Investment
There are a few different investment types you should be aware of before you jump into creating an investment portfolio. Stocks and shares are probably the most popular investment options you’ve heard of. You can buy stocks and shares through a broker and use their website to find, buy and sell stocks online. This is a great way to gain experience of the market.
Once you feel more comfortable trading stocks and shares, you might also like to consider options. Options are a way to stabilize the price of a stock by essentially gambling on the direction the price might go, up or down. So, if you have a stock price you think will decrease, you might like to sell an option on it to minimize your losses but if you see an option and you think the price of the stock will increase, you could buy the option and hope for the best. Looking at historical options data to see how the market has operated over an extended period is useful for decision making.
Creating a Balanced Portfolio
Personally, I believe it is safe to create a balanced portfolio. A balanced portfolio means that you have a range of different investment types so that even when the market fluctuates, your overall investments will remain stable. A balanced portfolio will include things like stocks and shares, bonds and other investments such as a house or even cars.
When you create your portfolio, you should first consider what your overall financial goals are. For instance, you might want to use your investments to make some relatively short-term profit so that you can buy a house. As you grow older, your goals are likely to change. So instead of making short term profit, you might be more inclined to letting your investments mature slowly to get a greater return in the long run.
When to Start Investing?
That is the question! You should start investing your money only when you are prepared to assume a loss. That’s right!
Investing is still essentially a form of gambling so putting your money on the line in the hope of a greater return is a risk. You still need to make sure that you have an emergency fund and never invest more that you can afford to lose. If you want to start investing sooner rather than later, you might like to try your hand with a small sum first as mentioned earlier. You must understand that the returns you get will be miniscule, but this is a good way to get started. Once your confidence is up, you can start investing large amounts of money.
Money-Smart Millennials 