Investing is a great way to make money, increase your net worth and set yourself up for financial security. However, it can be difficult to understand how the stock market works, and how to start out if you’re new to investing. In this guide, we’ll be discussing our top tips for investing as a beginner, so that you can create a secure, diverse portfolio.
Open an Investment Account
The first thing to do before you can start building your portfolio is to open an investment account. To do this, take a look at the different online brokers that offer investment accounts through which you can put money into stocks, bonds and index funds, as this will give you a high level of flexibility when it comes to deciding where you want to invest your money. Keep in mind that when you trade, your broker might charge fees which can occur annually or per transaction, so it’s important to understand the terms of your account before you open it.
Decide How Much You Want to Risk
Once you’ve opened your investment account, the next step is to decide what risk level you want to trade at. Everyone has their own opinion on how much they’d like to invest, and what they’d like to risk when trading, so it’s down to you to work out the best approach. If you’re young, or you have a large amount of disposable income, you might be more willing to go for high-risk investments compared to someone who is getting closer to retirement.
If you need some help to decide, then you can use dedicated tools to work out how much income your dividend stock portfolio will generate over time, which will give you a good idea about whether you want to take more of a risk, or if you can afford to play a bit safer – this calculator does the work for you and means there’s never been a better time to look forward to the future when investing.
Choose Your Assets
Now that you’ve made the big decisions around your account provider and risk level, it’s time to choose your assets. There are a range of different assets that you can invest in, such as:
Stocks and Shares: Investing in stocks and shares means that you’ll own a percentage of a business’s equity, and as the price of the unit rises, you can make or lose money on your initial investment.
ETFs: Exchange Traded Funds are a collection of assets, which can include stocks and bonds, that you can invest in if you want to diversify your portfolio. Compared to individual shares, you can experience lower risk with ETFs as their price relies on the success of a large number of entities rather than one individual company’s performance.
Bonds: Bonds are a lower risk investment than stocks and shares, as they essentially involve loaning money to the government or a company who then pays the money back over time, with the interest accrued bringing you profit and driving up your returns.
A popular approach to asset selection is to diversify your portfolio as much as possible by investing in variety of different areas to secure your financial future.
Although investing in the stock market may feel daunting as a beginner, it’s a great way to grow your assets and set up a secure financial future for yourself and your family. By following this guide and opening an investment account with a reputable broker, taking the time to decide how much you want to risk and choosing your assets carefully, you’ll have a balanced portfolio in no time.
