Investing for Beginners – What You Need to Know

We’ve all heard stories about people like Warren Buffett and Peter Lynch who’ve managed to build a fortune by investing. In case you’ve decided to do the same, you’re on the right track. However, it takes much more than will to build a successful career as an investor. For starters, it’s up to you to learn more about the world of investing and become familiar with all the basics so that you could make your first move as an investor. With that said, let’s take a look at everything a beginner investor needs to know.

What is net worth and why is it important?

One of the most important things every investor needs to know is what net worth is and why it’s important to keep track of it. Your net worth is the sum of everything you own including cash, your house, your investments and even jewelry – minus the total of your debts such as bank loans or mortgage. Being an investor means you have to be aware of your net worth at all times and constantly look for ways to increase it. The reason behind this is that your net worth is a more accurate representation of how well you’re doing than cash.

How does stock market work?

Put simply, the stock market is the place where all the transactions in the world of investing take place. Investors buy and sell shares on the stock market in order to gain profit and improve their personal finances. Every share on the stock market is a part of a company and it’s sold in order to help the business boost its profits and achieve financial success. Once you buy shares of a company, you become a shareholder and it’s up to you to choose whether you want to keep them long-term or sell them for quick profit.

How do I buy shares?

Not so long ago you had to make a bunch of phone calls in order to buy shares of a company you believe will do well in the future. Things have changed a lot since then and buying shares has become something you can do from the comfort of your home. As long as you find a broker you can trust and start an account on their website, you can buy and sell shares with just a few clicks of a button. After buying your first shares online, it’s time to wait and see how well they do and how much profit they’ll bring.

Is there any special lingo?

You may have heard a thing or two about investing before but that doesn’t mean you’re ready to start making investments. Being familiar with words and phrases such as “shares” and “stock market” isn’t enough. Instead, there’s more trading terminology you need to learn if you want to succeed as an investor. Of course, you don’t have to learn the entire glossary at once but checking up words and phrases you come across is a must. Make sure you don’t start investing until you know all the commonly used terms and are able to use them yourself.

What is portfolio diversification?

Putting all the money you have in the same shares isn’t a good idea. No matter how much profit you could potentially make by doing so, investing in the same thing involves just too much risk. Just think about it – the last thing you want to happen is for you to invest all your money in one company only to see its shares lose value over time. This is why diversifying your portfolio is a good idea and you should constantly look for new things you can invest in. Stock investors usually opt for gold and real estate for diversification purposes.

How do I start?

Learning more about investing is critical if you want to succeed but at some point, you’ll have to make your first investment. And how exactly do you do that? You’ll be happy to hear that most brokers now offer simulators beginner investors can use until they get a hang of it. These things allow you to experience trading first-hand without actually spending money. Just bear in mind that the amount of risk you can take on simulators isn’t anywhere close to the amount of risk you should be taking when investing real money. Once you start feeling like you’ve learned enough, it’s time to make your first real investment.

The bottom line

Investing often seems much easier than it actually is. There are just so many things you have to be aware of if you want to make sure you only make the right moves in your career as an investor. Just remember that mistakes happen and there’s no reason to give up even if not everything goes according to plan with your first few moves as an investor.

Written by Anna Stinson

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