Are you new to investing in startups and other ventures but want to have a taste of the waters? Below are five expert tips for novice investors who wish to lower the risk as they start out in investing.
1. Start With Penny Stocks
Penny stocks would be a fantastic place to learn about the volatility of investing and how to wade through the tough times as a new investor. Penny stocks are worth very little, sold for less than a dollar, and also have a small risk considering the much you spend in the penny stocks. The idea is to avoid taking a huge risk that can see you making significant loses while you are trying to get the hang of things. With penny stocks, you are more or else experimenting with various strategies that you can later employ in other investment options.
2. Align Investments With Business Goals
Avoid making any speculations about your business before you take into account the potential in other entities. Start with evaluating your business goals, the business plan, your finances as well as outstanding debts; all this should be geared towards one objective making money that enhances instead of supplementing your income.
Taking money allocated for something else in the business to use it to further your holdings is never a smart move. What if your investment turns sour? You will end up losing money on the investments and subsequently the company. As such, such a move is not smart especially when you have a low cash flow. Always have your business’ best interests at heart. Think of the investment decisions or investing as ‘gambling, and consider using surplus profits from your business to make down payments on your investments.
3. Diversify Investments
Diversification is a general rule of thumb in investing. The idea is to avoid putting all your eggs in one basket. You do not any your investments to take a nose dive in the event one or more stocks devalues pulling the other down along with them. You should ensure that you can still make a profit with one or more of the stocks even when others turn sour.
4. Consider Mutual Funds
Always take into account a particular level of risk in every investment you make, whether savvy or not; and ensure you find a balance. The lower the risk when starting out, the better; and mutual fund is a fantastic place to start out.
Take an interest in large mutual funds that are a combination of hundreds of bundled stocks with a growth rate supported by money injected in by a fund manager. As such, such funds have an investment with an extremely low risk of loss and an ideal option for novice investors. As your stocks grow, you will have a better understanding of how things are done as you wade through the volatile and calm seasons of the market in preparation for the big ventures that you are eyeing. It’s one of the many great investment opportunities out there.
5. Keep Time on Your Side
You are bound to lose everything if you are getting into investing with the notion that it is a ‘get rich’ opportunity. It is a common outlook that many amateur investors have about investing. However, start with the view of it being a long-term thing because the best returns will often be realized by those who wait.
The market will look promising for some days, but many are the days that things will look bad but that is not always a sign that it is time to pull out your money. Most novice investors will pull the money out when the market is sour so that they can put it back in when things look promising, and that is how many miss out on some of the best returns. Always remember that resulting returns after a bear market tends to be much higher than before.
