Editor’s Note: Here at Dispatches, we are always looking for ways to help our readers do things. For some of our readers, that means helping navigate the working world, for others, it means assisting in the ever challenging question, “what’s for dinner?” For still others, it means figuring out how to balance family life with everything else. In an effort to aid in all of these endeavors, we have collaborated on this article written specifically for our readers.
A lot of people avoid the world of investment because they deem it to be too difficult or too complicated. But, it doesn’t have to be that way! And, if you’re a novice investor, then you shouldn’t let any misconceptions put you off from starting your investment venture. Below are a few tips to consider before you get started. It is important to note, this is general overall advice and any specific detailed questions about investing should be directed at a certified financial planner who can discuss your options and help you create a plan specific to you and your situation.
Consider options trading
If you want to dip your toes into the world of investment before diving right in, then options trading might be for you. As documented in many options trading for dummies posts, this type of trading involves bidding on an obligation to either buy or sell a stock, share or asset, rather than to buy or sell them outright. It is the perfect way to get used to the demands of investment without having the pressure of committing to anything there and then.
Study the markets
Whatever type of investment you decide to make, whether it be options or outright, you will have to study the markets you trade on. You will have to work out what is rising, and what is dropping. You will have to work out just how much of an impact external forces are making on a particular market, and then you will have to work out how you can use this knowledge to your advantage.
Quite importantly, you will have to work out the lingo of stock markets, particularly those that involve the bulls and the bears. You see, these two terms are very important in all stock markets, no matter what is being traded upon them, meaning a knowledge and understanding of them is pivotal. Just quickly: a bull is a market in which the prices are rising and thus investment is very much encouraged, a bear is a market in which the prices are dropping and thus quick selling is fervently encouraged.
Understand the risk-to-reward ratio
Another very important aspect of the world of investment is the risk-to-reward ratio, and you must have a very clear understanding about this and how it can impact your investment venture. This is the measurement all good investments use to decipher and equate whether the returns that can be expected from the investments that they make are worth it in relation to the risk of doing so. And, if you want to prove yourself to be a good investor, then having a clear view of what is worth the risk and what is not is absolutely pivotal — so, do your research!
Investment can be a fun and financially rewarding hobby, or it can even be turned into a career. Be sure to contact and work with a licensed financial advisor for your specific situation. And, remember to ask yourself one important thing every time you feel an itch or have a need to invest: is it worth the investment?