How to invest?

 

Since I started to work as an investor and portfolio manager, I realized that there is more misinformation and fear surrounding the world of investing than positive aspects of it. There is so much confusion about it. 

And then the fear of losing it all. The horror ... when the market crashes and money is on fire.

If the idea of investing in the stock market is confusing, let's simplify it. It's not the easiest thing to do but it's not rocket science either. I promise you can do it.

All of us are aware of the benefits of investing. We save money, invest it in the right places in the right form and reap the benefits. Many of us are more financially adept at knowing how to properly invest in the stock market, and few of us are in the position where we realize that investing in the stock market is a good habit and how it should be done. 

Let's look at the benefits of investing in the stock market:

• It builds your asset: Long term growth in equity investments are excellent. Your money grows as the economy grows.
• Saves you from inflation: keeping your money in the bank will only lose its value. 
• Easy: It is one of the easiest ways to invest anywhere. 
• Liquidity: You can sell your stocks as soon as you need money.
• Dividends: If you invest for the long term, you get paid a share of profits, aka dividends.
• Long term financial freedom 

Inflation makes your money
lose its value

There are obviously also risks associated with stock investments.Markets are generally going along with the economy; if the economy fails, stocks can crash. But there are certain ways to minimize the risks. But let's accept the fact that risk is everywhere. If you invest in real estate, that can also crash in value when the economy fails. A sound investment strategy means low risk over a long period. That low risk is achieved through various strategies. 

 

One of the best ways to minimize risk in the stock market is to diversify. What does it mean to diversify? Glad you asked.

Diversification simply means investing in many places. You can invest in many stocks from various sectors like technology, real estate, airlines, pharmaceutical, green energy, oil companies, etc. Also, you can invest in many markets at a time. For example, in the US stock market (NASDAQ, NYSE), UK market (LSE), German, French, etc. Investing in many sectors and many markets means if one of the sectors performs poorly, others will hold up. Same for many markets. It is similar to the old wisdom of "Don't put all your eggs in one basket."

Now let's see how to simply do it. 

It is essential to know where you are investing. Trying just to buy random stocks will only increase your risk. You can read and do your own research before deciding to invest. Then you have to keep an eye on your stocks to see if something drastic is happening.

One of the challenges is accessing information from reliable sources and deciding how to invest and where to invest. By 'where', I mean the platform. 

Many platforms can help you trade and invest in stocks. While choosing a platform, pay attention to the following:

• How much does it cost to trade there (the fee)?
• Where is this platform regulated?
• Does it allow you to invest internationally?
• How many markets does it cover? (so you can diversify)
• Is it user friendly?
• How is their support?
• What about the mobile app?

Over the last 8 years, I have used many different platforms. Some were nice, some were not. Recently (4 years already), I have been using eToro, and it seems to positively answer all the above questions to my satisfaction. I don´t recommend the use of CFD* or leverage while investing. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 61% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

eToro also has this feature where you can simply copy** an investor you think is doing well and is knowledgeable and qualified to make investment decisions. Once you copy, your money is doing the same trades/investments as the investor you copied. 

Also, it's better to first familiarize yourself with the platform you will use before going in big with your money there. A small mistake can cost you a lot there. So I recommend trying their practice account. If you decide to join the one I am using these days. You can start here.  

Happy Investing! 😃

The content above is intended for information and educational purposes only and should not be considered investment advice or investment recommendations.

*CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 61% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

**Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.