How Easy Is It to Become a Successful Trader? - choosing an investment - how to make money trading

Everybody knows that investing is possibly the most grown-up thing you can do.

Once you’ve started making some income, you may start thinking about the best ways to increase your fortune and hold on to your money.

Obviously, investing is one of the ways to do just that. However, if you’re investing for the first time, you may find it a bit intimidating.

You have to give up your hard-earned money, and you feel like there are no guarantees that it’ll ever come back. So, what do you do? Here are some tips to make your decision-making process a bit easier.

1. Have a plan

Before you invest as much as a penny, you need to make a clear plan. You need to have a goal in mind.

Are you trying to prepare for retirement? Are you trying to raise your fortunes in order to buy a house? What is your end game?

This is extremely important because it determines some important factors that affect the way you invest. Some of these factors are the time you have, and the risk-tolerance you can afford.

They pretty much dictate the conditions under which you invest, so think it through and make sure you have a strategy in mind before you do any actual work.

2. Start early

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One of the best things you can do to earn money is start investing early.

Let’s say that your goal is to reach a certain sum of money by the time you’re 60. If you start saving when you’re 25, you’ll need to invest about four times less money each month, then if you start when you’re 45.

It’ll be easier on your budget if you start early and put aside a small sum on a monthly basis, than if you have to part with a larger sum every month because you’ve waited too long.

3. Do your homework

One of the most important principles of investing is to never invest in the things you don’t understand.

Before you make any kind of investment, make sure that you figure out exactly how things work in that particular case.

Don’t let anybody talk you into investing in something you’re not sure about or something that seems in any way strange to you.

Another good rule of thumb – if something seems too good to be true, chances are that somebody is trying to pull wool over your eyes. Be smart, especially if you’re considering investing a larger sum.

4. Diversification is the key

Don’t put all your eggs in one basket.

It’s common wisdom, but it doesn’t hurt to remind yourself of that from time to time, especially when you’re considering your investments.

If you invest all your resources into one project, and it fails, you’ve automatically lost all your money.

You always need to backup all your plans and your investments as well. Therefore, it’s always better to spread your money a bit.

If you only buy stocks, don’t limit yourself to one company only. Try to combine different things – like real estate, shares, gold, and so on – in order to achieve maximum results.

5. Don’t rush into anything

It’s a good idea to start investing early in your life. However, it’s not a good idea to rush into anything, no matter your age.

If you spot a good investment opportunity, don’t miss it. On the other hand, if you have the resources, but there are no suitable opportunities… Well, hold on to your money until one arrives.

Don’t get desperate with trying to invest, because the despair will make you an easy prey for tricks and frauds.

Similarly, don’t buy and sell too often, especially if you’re new to investing. Focus on the long run, and avoid the temptation to act every time the prices change.

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6. Consider stocks and bonds

By investing in shares of stock, you can make a profit if the price of stocks increase or through dividends that the company declares.

You can have different rights depending on the type of stock you hold. If you have common stocks, you can vote at shareholders’ meetings and receive dividends.

If you hold preferred stocks, you don’t have the right to vote, but you are more likely to receive dividends, and you have a higher claim on the company’s assets in case of liquidation.

By purchasing a bond, you practically lend money to a company, in accordance with the terms specified.

You receive the interest regularly until the bond principal is returned to you upon the maturity date. As they are issued by governments, municipalities, or corporations, they are a relatively safe investment.

7. Invest in real estate

Now, investment in real estate is a bit tricky in the sense that there are no guarantees that you’ll be able to make a profit.

Therefore, if you’re buying a property only as an investment and have no intention of using it, you should find a property that’ll generate cash-flow easily.

Obviously, that means rental properties. If you invest money into it, you’ll be able to get it back once you sell the property, and you’ll be able to make some profit even before you sell.

If investing in real estate is what you’re looking for, another good idea is to start small and move on from there.

Make sure that you are able to pay the installments by yourself, in the case that you can find a tenant. See how it goes, and then start considering bigger things.

8. Look into alternatives

Of course, there are alternative ways to invest. For those of you who consider buying stocks a bit too abstract and like more tangible investments, gold or diamonds are possible options.

This type of investment is good in times of financial strain, as both gold and diamonds keep or increase in value over time, and rarely become less valuable.

Still, in periods of prosperity, they are not always the best investments.

Sure, they increase in value over time, but they don’t generate any kind of cash flow.

That means that buying gold and diamonds is less an investment, and more a way of saving money.

Diamonds are a particularly risky investment because an average person cannot recognize the high-quality ones, so if you want to invest, it would be wise to hire a diamond broker to protect your interests.

Don’t expect to get rich overnight. Investing isn’t the same as gambling, and there is next to no possibility of quick earnings.

You need to be realistic, and understand that investing can significantly raise your fortunes in the long run.

Read also: 5 Tempting Tangible Assets That Can Boost Your Investment Portfolio

About The Author

Lucas Parker is a business consultant with a passion for the writing. Doing his research, exploring and writing are his favorite things to do. He works as a consultant for Diamond Portfolio in Sydney. Besides that, he loves playing his guitar, hiking and traveling.

If you’re investing for the first time, you may find it a bit intimidating. Here are some tips to help you choose an investment. #investing #investment #moneytips