Step 1. The Goal is Key
Only clear understanding of your ultimate goals – of what you want to achieve by investing – will set your mind straight and motivate you to press on even after a failure. Make sure your goal is not abstract; better yet, take a moment of your time to write down, with specifics, what you would like to achieve and how.
Step 2. Get Your Bearings
Investment is a specific area of expertise with many terms unfamiliar to the layperson. To absorb the incoming information well and continue improving your knowledge, make sure you have learned all the basic terms and know exactly what they mean. Pay attention not just to the general terms, but also to the main indicators and principles behind investment tools.
Step 3. Education Above All
It does not matter how you are going to manage your investments, directly or by proxy, you must be familiar with the basic concepts of economy and the functioning of the market. Understanding the recurring nature of market processes, as well as the connection between profit and risks, will help you save many precious nervous cells.
There are plentiful opportunities for studying the basic market terms and laws. You may want to read books on investment written by popular authors. There are free training courses and webinars online that you may find useful, and you may also want to look at the social media pages of modern investors. Finally, private lessons and paid consulting services are both valid options. Naturally, you should take time to consider the information you have learned and take it in before starting up your own investment.
Step 4. The Right Mindset
No one is safe from errors. Even the most famous traders and investors had suffered their fair share of bumps and bruises prior to getting rich. Martin Schwartz, who gave birth to the basics of day-trading, said the following about his success: ‘Here’s how I became a winner: I learned to lose.’
It would be helpful to have an action plan ready for emergencies. It will enable you to stay on your feet and keep calm when you need to make a decision quickly.
Step 5. Ready, Steady, Go!
No investment is feasible without a starter’s insurance fund. Using loan money for stock exchange games is bad practice. Here’s how to save up enough:
- set aside small amounts at a time;
- secure yourself with a backup source of income;
- optimize your spending habits.
Investment works best when you have free money to spare and no obligations pressing down on you, like loans, mortgage etc.
Step 6. Picking Your Style
Before you begin trading, make sure you have realized your expectations, evaluated your own capabilities and decided on how much risk is acceptable for you. If you feel afraid of losing, then the more traditional instruments, like stocks and bonds, may be the better choice for you. Don’t mind risking? Try trading in futures and options. It is only through trial and failure that you will eventually settle on a combination that works perfectly for you, and makes you comfortable with both the process and the results.
How Much to Invest for a Start
You don’t need millions to get started. Fortunately for everyone, stock instruments are reasonably priced. Unit investment funds start at $50, and you can replenish your account by as little as $100. Shares are even more affordable at $5+.
It goes without saying that big returns are only possible on big investments. However, entering a new and unfamiliar investment area with a large amount is just too high of a risk; you may lose everything. For an optimum start, $400 or slightly more would be just about right. You will not earn heaps of cash, but you will gain valuable insight into the inner workings of the market and still get that intoxicant taste of your first victory.
By investing moderate sums into different tools, you will be able to analyze your errors after a while and determine which options work best for you. Then you will be able to gradually increase your investment amounts.