If you haven’t already, please read the previous ‘Investment Made Easy Pt. 1’ published on December 9th, before continuing to this article.
Now that you have a bit more understanding of types of investment, in Part 2 I’ll give some tips to help you on your road to becoming a successful investor. Remember that you don’t need to have a lot of money to start investing, but you should be in a financially healthy place before you begin.
Many investment gurus have a similar suggestion for investors: Have a vision of what you want to achieve. Don’t shy away from this; consider the remainder of your life and how you’d like to spend it – where you would like to be living when you’re retired and what lifestyle you’d like to have. Maybe your aim is to be more financially independent and make purchases as they arise without worrying about their impact.
Following this, you should think about what you will need to get to that point, working backwards to where you are now. Break your vision down financially; how much money will you need to have at that point, how much money per year do you need to earn to get there and what monthly income is needed to achieve this. This gets you into the right frame of mind to decide on what investment strategies to choose and how hard do you want to work to achieve these targets - What does your average day/week need to look like?
Do your homework. There are many websites, videos and books on getting into investing that break investment down into easily digestible pieces. Some suggested books for the beginner investor are ‘The Intelligent Investor’ by Benjamin Graham, ‘The Essays of Warren Buffet’ by Warren Buffet and Lawrence Cunningham and ‘A Random Walk Down Wall Street’ by Burton Malkiel. If you’re not a big reader, then you can talk to people involved with investment; from Financial institutions and brokerage to people you know who are familiar with and involved with investing. Don’t be afraid to ask questions on your social networks – you may not realise how many active investors you know! The point is to learn as much as you can, which will help you become a better investor.
Determine the type of investor you are; Aggressive, Moderate or Conservative. Your investor profile takes into consideration factors such as your risk profile, how immediately you may need the invested funds and whether you want to preserve or grow capital (funds). A conservative approach has the least risk and offers the most immediate access to your funds, but often will not give as high a return as a moderate approach, which has a bit higher risk involved and more limited access to your funds.
Decide on how involved you want to be. Are you a DIY type person or would you prefer to let someone else manage everything for you, or perhaps a mix of both? You’ll likely still need a brokerage firm but knowing where you stand will help determine your way forward and the types of portfolio you develop.
Speaking of investment firms, how should you select one? Most, if not all banks offer investment services, while there are also local investment firms. The majority offer similar services, so how do you choose the right fit for you? Here are some tips:
- If you don’t have a lot of cash to invest, look for a firm that offers investment options with a low minimum investment. These tend to be low risk but also mean a return that may not excite you in the short term.
- Ensure the company is reputable and has been in business for several years, with experience, not only in investment but in earning a good return for their clients. Don’t be afraid to ask about their historical performance.
- It would also be wise to find out how much experience they have with clients who are in a similar financial and life situation to yours.
- How diverse is their portfolio? What sort of instruments (e.g. stocks or mutual funds) are they experienced with?
- What are their client service relationships like? You can get a gauge of this by how difficult it is to get onto a rep to speak with you, the personalities of the rep and people at the company and how generally helpful the company feels to you when dealing with them.