With the rise of online brokerages, it is now easier than ever before for people to get involved with financial investing. However, with this ease comes a level of risk. Newcomers are likely to make some mistakes along the way, and this can result in a loss of money. As a new investor, there are certain things that you should try to avoid in order to save yourself the trouble of losing your investment.
The first thing you want to avoid is jumping in head first. You may have a some of money that you would like to invest, and you may even think that you have found a good investment. However, as someone new to the game, you will want to take a step back and slow down. Throwing all of your money into an investment too quickly is a good way to lose that investment. According to Alvexo.com, an online brokerage that deals with investing in international currency and Forex, “You should start small, then build up as you gain more experience and knowledge”.
Secondly, you want to avoid what may look like a cheap investment. I am referring specifically to penny stocks. It can seem like a great idea based on their stock prices – getting a hundred stocks in a company for only $100, rather than paying the higher prices of some blue-chip stocks. However these stocks are very vulnerable, and can plummet at any time. There is a high risk factor involved when you invest in penny stocks, so you should probably wait until you have a bit more experience before getting involved with them.
The third thing that you should avoid is chasing what the news tells you. If you watch financial networks, or read rumors online, they will offer you advice as to what they think you should invest in. However going by their advice may not be the best move. You may get lucky and it will pay off, but this is likely to make you trust them again, and in the long run you will probably lose your money. Or you may jump in too late, or follow the wrong rumor, and your savings will be lost. Instead of trying to pick out what will be the next Microsoft, go for a company you have some kind of connection with, and that you can feel a little safer that you will get a return on your investment.
Lastly, you want to avoid putting all of your eggs into one basket. You want to build a portfolio that is diverse to help manage your risk. By investing in different things, you are more protected should one of those investments fail. Take the money you have saved up for investing and look for several areas that you can spread it around to. If one of your investments hits it big, your return will be smaller, but the risk of losing your savings will be much smaller. For a first time investor, this is the way to go.
For first time investors it is smart to simply take your time, do your research, and make safe investments. These are more likely to generate you a return, and you’ll therefore be encouraged to keep investing. You don’t want to put all of your money into one investment, lose it a week later, and then be put off from investing forever. Take it slow, and as time goes on and you learn more about how the system works, you can make larger investments that you feel comfortable with.