Tips & Tricks for Novice Investors

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My roommate and I could use some basic guidance. We’re both undergraduate students who want to invest a little on the side. We’ve been debating whether to dabble in the stock market two or three months. Few people know about our plans, since we haven’t been advertising them.

 

We’re both a little nervous about making poor decisions and squandering our money. That’s why we could use some tips from someone more knowledgeable about investing. It doesn’t even make sense to admit we tried, unless we net an adequate return, right?

 

To that end, what are the best and most viable investment strategies for beginners? What should we keep in mind?

 

Successful investing in the stock market is no simple feat. You should know that some losses are inevitable when it comes to the stock market. Seasoned investors are just as susceptible to market fluctuations as their novice counterparts. What’s most important is your long-term performance, which means there’s an acceptable learning curve for aspiring investors. You can’t expect to enter the fray without some tolerance for risk and potential loss.

 

Business Insider published a salient article advancing Warren Buffett’s best investing advice for beginners. If you don’t recall who Warren Buffett is, that’s your first mistake. That aside, some people may consider Buffett’s suggestions somewhat controversial. He questions the value of diversification, urges people to invest in themselves well before considering the stock market, and then opposes day trading. Reflect on his critical points because, as undergraduates, one could argue that your combined focus and efforts would be better served elsewhere.

 

The US Securities and Exchange Commission (SEC) maintains a public check list of ten things to consider before making investment decisions. The list is quite comprehensive, but it should highlight just how much thought should go into investing. Let’s say you return to your roommate and discuss these things, then come to the conclusion that you both still want to proceed. What’s the next step  Y Y?o umuts determine how you want to invest your money.

 

Staff writers at the Financial Industry Regulatory Authority (FINRA) created an informative overview explaining the diverse types of investments available in the market. You’ll find a dozen different types to evaluate, including stocks, bonds, annuities, and options. The first example, stocks, tends to get most of the limelight nowadays. However, the other investment vehicles are just as viable, depending on your circumstances and expectations. You should also realize that your roommate could have a distinct risk tolerance separate from your own. In other words, you might prefer stocks, and he might prefer bonds. One isn’t more profitable than the other. Investment decisions are often personal so be careful how you interact while making them.

 

Another sound strategy is to understand what’s involved in stock ownership. Fortunately, Kimberly Amadeo at The Balance already discussed the benefits and disadvantages of investing in stocks. Some pros include staying ahead of annual inflation and taking advantage of a growing economy. Major cons include losing some or all of your investment and competing against professional traders working on behalf of an institution. You can avoid many pitfalls by arming yourself with as much knowledge as possible. For instance, resources like Stocks under 5 let investors browse relevant news and tips. Just be sure to cross-reference your information across multiple outlets to ensure accuracy. The last thing you’d want to do is make a decision based on misinformation.

 

“An investment in knowledge always pays the best interest.” – Benjamin Franklin

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