Beginner Investing Tips

Most people have heard of investing, and generally recognise it as a good thing to do with their money.

But if you are unaware of what investing means, the basic principle involves moving your money from one place to another place, with the intention of getting a higher rate of return on your “investment”.

Therefore when you make good investments, the value of your investment will increase over time.

This means that when you decide to retire (or draw upon that investment), you will have some extra money available to you which hopefully should help to ensure your future is a financially secure one.

Why Don’t People Invest Their Money?

Despite the obvious benefits of investing money, investing is something most people tend to shy away from.

They see it as being complicated, or think that only people with lots of money can invest in things. The other thing which puts people off is the risk associated with investing.

Investing can be an extremely risky business if you don’t know what you are doing, or invest your money poorly.

If you make a bad investment you could end up making no money on your investment, or worse, loosing some or all of it.

However like with everything in life, the amount of risk you take tends to be proportional to the amount of reward you will receive in turn.

Generally speaking the riskier the investment, the higher your chances of getting a better return on your money.

So when it comes to investing the trick is to find a balance between risk and reward, something which you can only get a feel of by investing your own money, starting small and learning through experience.

Playing It Safe

The alternative to not investing your money is to play it safe, and keep your money in a low interest bank account.

Of course because this is a low risk option, the return on your money is going to be relatively small.

This is why a lot of people decide to start investing, so that they can make more from their money by taking calculated risks.

Note : Technically, keeping your money in a bank account is investing it. This is just a low risk investment that offers a low rate of return.

Investing For Beginners

In this article we are going to be taking an introductory look at investing, with the aim of educating those who have never invested their money before, the basic options which are available to them.

This article should hopefully help to dispel some of the false assumptions people have about investing, such as the need to have a detailed understanding of economics or the need to be extremely wealthy.

Note : This article is not advocating any form of investment, it is merely written for educational purposes.

You Don’t Need Loads Of Money To Start Investing

Perhaps the biggest misconception people have about investing, is that they need a lot of money in order to be able to start. This is not true.

A lot of people also think that they need a financial advisor in order to invest, so that they can be told where to invest. This is also not true.

The fact is you can start investing with extremely small amounts of money (e.g. £50), and you can do it by yourself without the help of a financial “expert”.

Most people who have made a lot of money through investing did not have a lot of money to begin with.

Rather they started small with what they did have, and used whatever return they got on their investments to invest increasingly larger amounts of money.

If you decide to get into investing this is a very wise approach to take.

Starting slowly minimises your risk during the learning period in which you gain experience and a feel for investing, whilst also allowing you to get a higher rate of return on your money than you would from keeping it in a traditional bank account.

Your Investment Potential

Your investment potential is how much money you have available to invest. The more money you have, the higher your investment potential.

So the first step to investing is to decide on how much “spare” money you have available to invest with. In order to know this however, you need to have a budget and be aware of your net worth.

Note : To read more about how to create a budget and your net worth, please see the following articles :

“Do You Know How To Make A Budget?”

“How To Create A Personal Budget”

However just because you have £5000 sitting in the bank, that doesn’t necessarily mean you have £5000 to invest.

For example, if you have three months worth of income set aside in an emergency fund to cover you should you loose your job, then that is not money you want to use for investing.

The same applies for money you have budgeted for mortgage or loan repayments. That money is money which is needed on a short term regular basis, and using it for an investment could put you at risk of loosing your home or car.

So when it comes to deciding upon how much money you have available to invest, you need to examine your budget carefully and see what financial commitments you currently have in addition to your long term financial plans. The money you have left over is your true investment potential.

Of course you are free to use your money as you please, these guidelines are merely provided to minimise the financial risks of investing for first time investors.

For those of you who are in debt and would like to begin investing, it recommended that you concentrate on repaying that debt first.

This because the money you spend repaying the interest on that debt is likely to be more than you will earn from your investment.