Maybe you earned a considerable raise this year for investment. Perhaps you’ve finally established your emergency fund, and you’re looking to start diversifying your portfolio. Whatever your reason or goals, you’re ready to learn the fundamentals of investing.
How do you get started? After all, many people experience considerable anxiety around financial matters, so you’re not alone in hesitating. However, if you want your money to keep pace with inflation, learning the fundamentals of investing is the best way to make it work for you.
1. Think Long Term
You may hear fascinating tales of day trading, but restrain yourself. Don’t fall prey to the siren song of a quick payoff unless you have significant time to do nothing but monitor the markets daily. Most individuals do best by embracing the long term as one of the fundamentals of investing. This strategy helps minimize market volatility.
Volatility measures the degree by which markets change over time, and the longer you hold on to an investment, the more likely you are to see a return.
This technique doesn’t mean clinging to investments that continually lose money. However, it does mean not rushing to sell the moment the Dow fluctuates. If you diversify well, stocks that perform strongly should balance out those that hit rough patches.
2. Consider Non-renewables
With all the emphasis the media places on climate change, you might think that investing in nonrenewable energy sources like crude oil represents a dead end. However, experts project oil to remain the leading provider of energy through 2050.
Much of the developing world lacks access to the kind of infrastructure necessary for converting to greener practices. Fully 90% of the growth in this investment will stem from these nations. Now is an ideal time to cash in on this thriving market.
3. Physical Assets Make a Comeback
For a long time, investors favored forex exchange, shares, bills of exchange, promissory notes, and treasury and infrastructure bonds. These intangible investments lit up the NYSE and the London Stock Exchange. Now, however, a considerable number of people focus on physical investments, like real estate investment trusts.
Everybody needs housing, and getting in on this market nearly guarantees a steady future return. If you amass sufficient capital, you might even consider breaking into the landlord business by scooping up properties to fix and rent out directly.
4. They Aren’t Making More Land
Many real estate students hear the advice to invest in land. Until humans master the art of colonizing other planets, it’s a finite resource. They aren’t making any more of it.
Multiple forms of land investment exist. For example, you can earn significant income if you purchase a property with oil or gas reserves. You can also invest in farmland or vineyards — why not marry your love of vino with your financial strategy? If you like preserving the wonders of nature for future generations, you can invest in recreational land, as well.
5. Don’t Overlook Your Home
A home represents many people’s most considerable investment. It’s always wise to work with a licensed real estate agent who understands the local market before making such a purchase decision. It also pays to perform inspections before signing, even if your locality doesn’t require them as a matter of law.
Insect, pest and mold inspections cost relatively little — less than $200 to $300 in many cases. Considering that your home expenses are multiple times this amount, it pays to shell out in advance to prevent more massive headaches later.
6. Take Calculated Risks
If you’re a hesitant investor, you might want to design a portfolio consisting of nothing but blue-chip stocks. While this nearly guarantees you a positive return, you won’t get wealthy doing so. Why not select at least one or two investments that pose a significant risk but offer the promise of considerable reward?
Think of all the people who wish they would have invested in Apple or Google before they became household names. Knowing when to take a calculated risk is one of the critical fundamentals of investing.
7. Balance Your Portfolio
Even if you’re a risk-taker, you don’t want to throw your money around willy-nilly. A robust portfolio should contain a variety of blue-chip and risky stocks, with a smattering of bonds and midrisk investments.
If you don’t have time to study the markets in-depth, consider mutual funds. These do the work of diversification for you — you kick back and enjoy the returns.
8. Consider Cryptocurrency
If you’re new to both the market and blockchain technology, you might not understand cryptocurrency. However, these hedge your bets if the dollar eventually falls, so they make a wise way to diversify.
Don’t do so with the hopes of getting rich quick, though. For every tale about massive gains from technologies like Bitcoin, there are horror stories of crashes.
9. Maintain Liquid Savings
Whatever you do, don’t overlook the crucial nature of retaining liquid savings. You should keep three to six months’ worth of living expenses in your emergency fund at all times.
Additionally, it’s useful to set up separate accounts for massive purchases like a new car or saving for holidays or vacations.
Get Started on Learning the Fundamentals of Investing Today
You don’t need to be a financial genius to get started with investing. Learn the fundamentals of investing with these tips and let your money grow for you.
Dylan Bartlett is a men’s lifestyle blogger from the City of Brotherly Love. He runs the site Just a Regular Guide, looking at other topics related to health and wellness, relationships, the outdoors and DIY. You can follow him on Twitter @a_regular_guide to get frequent updates on his work.
