10 October, 2019
Firstly, one should have appropriate knowledge and understanding of the market before getting involved financially and thereby avoiding financial losses. As quoted by Mr Warren Buffett, “The market can be confusing and complex only if you lack the proper knowledge, if you know your basics then they can be as easy as your 5th grade math class.”
Things to keep in mind:
It is essential that you start with a small investment amount; no matter how many digits your bank balance holds. It is usual for a beginner to make a lot of mistakes initially but having a small initial investment or AUM (asset under management) will limit the potential downside from the financial perspective. In a nutshell, the mistakes you make in the market are the lessons you learn from the market itself and the losses occured out of the mistakes are the tuition fees incurred in exchange for the knowledge gained from making the loss. Therefore, if your initial investment is lower, the tuition fees or loss incurred will eventually be lower.
When you initially start investing, you need to be extremely observant and active about everything that is happening in the market because even a small change is affecting your portfolio and every increase and decrease is a new lesson for you. You need to learn from the moves you make, the shares you buy, and the money you make. Investing actively will teach you more than any school or course available in the world.
It is favourable for beginners to stick to what they know during the initial stages of their investment journey. For example, if an individual is familiar with how banks and financial institutions work, he/she should try to track and invest in financial stocks rather than investing in stocks of other sectors like the chemicals industry, automobile industry, etc. that they know nothing about. This would make it easier for investors to understand how the market works.
Consider losing money as a gain instead of a loss since every time you lose money, you gain knowledge about something new. It is important that you learn from the mistakes you make and never repeat them again in the future. This will surely avoid a lot of financial losses in the future when you are managing a significant sum of money.
This is the most important point of all. It is extremely important for all beginners and even seasoned investors to dedicate a lot of time to read, be it annual reports, books from veteran investors, financial bestsellers, newspapers or even financial magazines- the list is endless- but it is very important if one wants to do well in the markets and stay ahead of the curve.
To know more about how to invest, please visit begininvest.com.