In earlier times only millionaires and financial industry experts could afford to get involved with investing. Now every individual has access to this activity without regard to his age, sufficiency level, and social status.

In 2020 very much a boom occurred in the equities market! Now people understand that nobody is insured against financial distress and it is very important to have the rainy-day fund.

But this fund should not be kept without any movement waiting for a crowning moment. Otherwise, the effect of inflation reduces much of its value. Money must raise money! And when a person makes investments, he is able to fatten the profits. But how should a beginner start out as an investor in the equities market?

What are investments?

Investments are funds invested in various assets to earn a profit or hedge against inflation. There are several ways to do it. In this article we are going to develop the theme of investing in the equities market.

Any person can get engaged in investing regardless of his age, occupation, or skills in economics. People often confuse two activities: investing and trading. Investors are people investing for the purposes of getting additional income. While traders continuously make short-term transactions. This is their primary source of income.

There are two investment styles: passive and aggressive. Passive investors invest in shares/bonds of particular companies and wait for darling gain/benefits. Aggressive investors opt for risky tools: startups, IPO, and others.

Why is it so important to invest?

Nowadays every person has almost anything he needs to live in accordance with rather high living standards. The only thing interferes – lack of stability. Let’s remember the early stages of coronavirus. Global community was panic-stricken. The enterprises crashed. The jobs were cut. People found themselves without work and out of money.

When that happened investors and freelancers not employed by these companies were the gainers. By the way, the crisis was a point of increase for many traders. For instance, on April 18th, 2019 the Zoom share value was 62$, in August of 2020 – 290$. The happy owners of those shares sold them almost 5 times as much.

Let’s consider 5 reasons, which will make you want to join investors community.

1. Financial self-sufficiency.

2. Hedge against inflation.

3. It affords the opportunity to increase your income greatly and raise living standards.

4. When investing you’ll be able to achieve your long-term financial goals: real property purchase, home improvement, education of your children and so on.

5. You will be able to count on additional income when retired.

6. In case of dismissal/job cut, you will not stay without means of living.

8 recommendations for beginners not to fail at the start

It is not always so easy to increase profit by investing. The reason for abandoning is a loss of money. At least once in life everybody has heard the story about an investor which has invested a huge amount and left in the dust.

Unfortunately, such things do happen sometimes. But only those investors are left in the dust, who are not skilled enough to invest all by themselves. They’re not experienced enough to make choices and take balanced investment decisions. They try to enter the market following information they have found over the Internet and have heard from other people. Another reason is emotions preventing them from being successful.

What do we recommend the beginners starting to invest?

1. Start as soon as possible. Time spins away. You think that retiring is far from today, but the fact is that in the time it takes you to blink your earning capability will be restricted.

2. Do not wait until you build up a large amount to invest. You can invest even if you have only 100$. It’s true that in this case your income will be much lower compared to the result you could get investing 10 000$, but you can afford to start in a small way. Sooner or later you will form a habit to put aside money for investing and the profit will increase.

3. Never invest in a business you cannot understand – this is the key strategy of legendary investor Warren Buffett. If everybody in the world speaks about cryptocurrency a lot, you should not hurry to invest in this asset. First, you should learn the subject by yourself and only then you may decide.

4. Do not refuse training. The investor often fails because of lack of knowledge. Some people do not want to spend their time on studying, the others prefer to save money and do without proper training. But you should understand that losses, you may suffer because of your silly mistakes, will definitely exceed the training cost. You should remember that half a battle is a right choice of a share which depends on your skills in fundamental and technical analysis.

5. Do not strive after big profits. Various pyramid investment schemes still attract people. Is anybody who does not want to get returns equal to 80%? But instead you’ll get empty pockets, nervous tic, and legal proceedings. You should remember: in the equities market normal annual returns make 20%. All other variants are not true, being provocative.

6. Rely on forecasts of only reputable companies. We regret to say that, not all articles you can find on the Web are written by dollar millionaires. Most analytics in an online environment are provided without due care and responsibility.

7. Do not be afraid to ask for help. When starting, many investors are afraid to make a mistake. There are a lot of investment companies, providing a range of useful services like investment management or automated trading. You’d better consider these services. What’s critically important is to choose a reliable firm. Choose a broker in a responsible manner. For instance, you can research popular investment companies like Interactive Brokers, Charles Schwab and Asset Capital Business (ACB).

8. Create your investment portfolio properly. Do not buy shares of only one company you like. One never knows tomorrow. Diversify! In an ideal scenario an investment portfolio should consist of shares, bonds, and ETFs.

Pros and cons

As we have already mentioned, investing is a perfect way to save and boost your fortune. But, as any other activity, trading in the equities market does not answer everybody’s purposes.

Let’s consider pros and cons:

Pros

+ You do not have to spend a lot of time as you usually do being employed. All that you need is to make the right choice of investment tools. If you make it, the money will work for you.

+ You may gain a lot over a short period of time (provided that you have a large initial capital).

+ You can hedge inflation.

+ If you lose your job\working ability, you will always have passive income.

Cons

– There is a risk. Nobody can guarantee that you will make a fast buck in a particular amount in a month. You can rely on your skills and good luck only.

– You are supposed to have initial capital to invest. You will not become an investor without available funds not immediately required.

– The less initial capital you have, the less profit you will get.

– Particular experience and skills are required.

– You cannot be confident about the future. Today your investment portfolio brings high profit, and tomorrow it can go into the red.

– You can fall victim to defrauders which are always in proximity to money. And investing is an activity for people having money. You can suffer from exit scam if you use the services of dishonest brokers and investment management companies.

Conclusion

Thus, investing is the possibility to save money and generate a passive income to build wealth. The activity does not require a lot of time. The chief thing is that you should be trained enough and skilled to start investing in the market. As a result, you will get financial independence – and that is a great benefit. While you will not get any income security – and that is a significant drawback.

What do you think of investing? Share your opinion in the comments below the article.

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