For those starting out on the road to wealth accumulation, the world of investment can seem a very intimidating place. Words like derivatives, bonds, options and leverage can seem confusing at first, and having worked so hard to save your money it’s easy to be fearful of making a wrong decision and seeing it quickly disappear again.
The hesitation is understandable but fear is no reason not to push forward. If you are looking for financial security then it’s important you start to invest and the sooner you begin the better. Time is a powerful wealth builder, and even a few years can make a huge difference to your accumulated earning once compounding takes place. The ability of your money to produce more money is one of the greatest benefits of investment.
Here’s a few investing tips for beginners to consider if you’re just starting on the road to building your wealth.
- Get Good Advice. You can’t be an expert in all areas of your life and when it comes to building wealth the knowledge and expertise of others will be crucial to your plans. The investment world is a huge and diversified market and you will need help in understanding it. Experts in different areas such as property or the share market will be important to you. Find yourself a mentor if possible – someone who has walked the path before you and achieved what you hope to achieve. They may be a friend or family member but they must be a trusted, and independent, sounding board capable of providing you with help where required. Don’t be afraid to ask someone who’s success you admire. Many will have had a mentor themselves and will be happy to return the favour to someone else.
- Learn. You will need experts around you but this is no reason to abdicate the responsibility of making decisions. The ultimate responsibility will be yours and even though you may call on others for specific advice you need to understand the principles behind each investment and the risks you will be taking.
- Start Slowly. You can begin investing with just a few hundred dollars. Don’t feel you have to wait until you have a large sum of money accumulated. Investing small sums as you go will give you the chance to learn more about the marketplace.
- Save a Little of Everything You Make. Regular and often is the true path to building your wealth. Your money can grow for you but the more you have to invest the faster you can accumulate wealth. Plants will grow on their own but continuous planting will make a garden much quicker.
- Don’t get Greedy. It’s easy to have your heads turned by promises of high returns and big paydays but there is normally a relationship between risk and return. Those investments that offer the highest returns usually carry the greatest risk of losing your capital. Be aware of what you are investing in and what risks are involved. Don’t put all your eggs in one basket.
- Keep it Simple. Investing doesn’t have to be a complicated process. Work within the boundaries of what you understand and what you are comfortable with. Complicated investment vehicles are no guarantee of higher returns.
The path to wealth is a journey you will make one step at a time. There will be times when you feel as though you are sprinting ahead and occasions when you feel as though you’re going backwards. This is a natural part of the journey. Understand that no portfolio can guarantee great returns every year. Be patient and don’t overextend yourself and you will increase your chances of maximizing your wealth.
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The information in this article is general in nature and does not take into consideration your personal situation or circumstances. You should consider whether the information contained in this article is suitable to your needs and where appropriate, seek professional advice from a Financial Advisor or other finance professional.