Do not be intimidated by investing. With the right planning and preparation, anyone can build a portfolio that can help them prepare for retirement or create a secondary income stream.
Given time and some cautious investing, you could even become a full-time independent investor making money from the markets every day.
Here is a quick guide to some of the things you should know before you get started and how to begin your investment journey on the right footing.
The Calendar rules
Timing is everything in investing. Get in early, and you can watch your profits grow quickly as the small, fledgling company you invest in becomes a household name. Put money into a stock too late, and you will be chasing minimal returns from a stagnant stock price. Big dates in the marketplace can also affect your portfolio. Earnings calls, investor meetings, and scheduled announcements from central banks can all send the markets into a spiral upwards or downwards.
Getting organized and staying on top of important upcoming dates is key to successful investing. Economic calendar from TradingView is an ideal solution for looking ahead to important dates in the world of finance. You can use it to check the economic calendar for this week and review information and analysis from its large community of investors. Tools like this will help you stay up to date with the market and plan your movements and positions.
Set your limits and goals
Investing often gets unfairly compared to gambling. Though there is a risk element to investing, stocks and commodities are more predictable than sports results or the roll of a dice.
If you have a sensible strategy, informed by data, you are mitigating your risk and increasing your chances of consistent profit, something you cannot do on a sportsbook. There are some basic steps you must take as an investor that are similar to those of a gambler, however.
Before you begin investing you need to set yourself a budget, or a limit on the amount you will invest. This will help prevent you from getting carried away and investing more than you can afford to, or chasing losses in the market and sending good money after the bad.
Set yourself investment goals too. How much do you aim to make in a year of investing? What return are you expecting from a financial product like a stock or a commodity investment? Setting these goals will help you plan and react to changes in the marketplace.
Understand your liabilities
Many investors enjoy making some small profits, and then spending them. Do not get too carried away at first though, you will have tax liabilities on your gains that must be paid. These do eat into your profits a little, but they cannot be avoided. Some of your research into investing should include finding out more about your potential exposure to capital gains taxes and other federal and local taxes and how they will impact your profits.
The money you make from the markets is income and may form a part of your total taxable income for the year. How and when you make your profits will affect the amount of tax you will pay.
Working all this out can be a full-time occupation, which is why many investors eventually turn to an accountant for help. There are a lot of resources available online that can assist you when working out your tax exposure, but a professional will help you find incentives and schemes that will reduce your overall income tax charges.
Design an investment strategy
Your investment strategy should reflect your appetite for risk, investment goals, and the level of income from your investments that you want to make in the future.
Having a strategy can help you pick the right stocks or commodities to invest in, and react appropriately to changes in the market. Buying shares on a whim or for surface-level reasons often leads to losses. Your strategy will help you avoid making this mistake and will increase your chances of creating consistent returns.
There are many different kinds of investment strategies that you should research before entering the market. You can create hybrids from these strategies to suit your goals and the amount of money you have to play with. Value investing, growth investing, and dividend investing are three of the most common strategies used by investors big and small to help them realize consistent profits from investing.
Use this guide to help set yourself up for an investing dream, not a nightmare. Planning and preparation are the two first steps to success, so make sure you follow the advice above to get yourself in the perfect position for investing. With a strategy, set goals, and the right tools to help, you will be able to start your investment journey on the right footing and provide for your financial future.