investment

Develop a Sound Investment Strategy. 5 Steps for Beginners

You’ve got a little nest egg and you’d like to grow it. Investing can give you good results, especially if you’re ready to take a long-term view and build a good portfolio. That means having a clear investment strategy that guides you through the sometimes-stormy waters of global stock markets. To get started, spend time finding the best stock trading app for beginners. Which that will be will depend on you, but ideally, opt for something that offers plenty of additional information that can guide your learning curve. Now for some general principles.

1. Learn and Understand The Market

Knowing what to expect from the market can be a big help, and that means avoiding a tunnel-vision approach that focuses on individual companies and local stock exchanges. The world’s economy is interlinked and there are many interdependent factors to take into account. Forming a global view means getting and analyzing a lot of information, so shortcut the process by following experts that regularly publish information and opinions on the world’s markets.

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Sure, they can be wrong too – who could have predicted the global coronavirus pandemic and how it impacted markets? All the same, you’ll get some well-informed opinions to help you make sensible, strategic investment decisions.

2. Balance Your Portfolio

Putting all your eggs in one basket is very risky indeed. It’s wise to spread your assets through various asset classes. Then target the big names in those classes to develop a watchlist. Why balance? Let’s suppose that resources take a downswing – they’re notoriously volatile. Meanwhile, your tech stocks were on the ascendent and industrials were doing pretty well.

The net result is that you win, and if things change in a few months and the balance swings, you still stand a good chance of winning, even if the swing was unpredictable.

3. Monitor Your Watchlist

Once you have a watchlist of companies you’ll use to build a portfolio, it’s time to start watching them to see how they’re doing. Are there a lot of stock movements? Are share values rising or falling? Try to figure out why this is happening and monitor news to get pointers. You’re looking for the right time to enter the market.

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Sometimes, stocks are overvalued and then swing back to a more realistic value. If you buy them at the top of the curve, you’ll lose. There are also times when stocks are undervalued, and that corrects over time too. Buy in at an undervalued rate, and you could stand to make good gains.

4. Don’t Panic

Once your precious savings are invested, there’s one more thing to remember. Don’t panic. Panic selling is almost always a mistake. Sure, it hurts to see your investment losing value – but what’s the long view? Selling at a reduced stock value means a guaranteed loss – and if those stocks then proceed to recover, it was an unnecessary step.

investment

Once again, knowledge is power. Try to make your buying and selling decisions in a calculated way, even when that means closing your eyes to some shorter-term losses and riding it out.

5. Consider Managed Funds or Tracker Funds

In closing, it’s possible to get the benefit of experts when investing in managed funds. It’s one investment, but it’s added to a pool of money that’s spread across asset classes by experienced investment managers. Tracker funds, on the other hand, simply track the stock markets using advanced software.

Once again, your investment is spread across asset classes but instead of being managed by people, it mirrors the overall market. Weird but true: tracker funds often do better than managed ones! Both managed and tracker funds are great when your nest egg is on the small side. In that case, you don’t really have the resources to build a balanced portfolio on your own, so buying into a fund does the job for you. If you’re eager to trade on your own, consider putting at least part of your available assets into funds like these. Now see if you can outperform them!

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