Morning our novice investors. Today we will dive into the first investing experience.
We think this article will be very useful for all of you but especially for those who will invest
for the first time in their life. If you have any questions ask us in comments section below.
In a low interest rate environment, it is hard to find a traditional place where your money grows and provides you decent return. Thus, more and more people are looking at investing in stock markets as a good alternative. But, before taking this decision, it is good to know what to expect from this sector. You should know how to cope with market changes. This article will try to explain each step of the investment process.
Step 1: Choose a broker.
A broker is a firm or an individual who executes orders from investors in exchange for fees. Traditionally, brokers were allocated to wealthy people but with the internet boom, brokers are available for all of us. There are large range of brokers for different investment purposes. We often distinguish two main types of brokers: Full services and Discount. This classification is not the only truth because of the wide range of internet brokers which “break” the rules.
However we will follow the classic approach.
“Full services Broker” are brokers who tend to be focused on a wealthy audience (large amounts of capital to work with). They provide a lot of financial services in addition to the traditional brokering. They advise you on your decision, provide you professional analysis and help you to understand the world of finance. To get access to these brokers you must pay large fees.
Also, you should correspond to their initial capital criteria (superior to £10,000).
On the other hand, "discount" brokers are focused on a large audience. Meaning that they have no initial capital restrictions or other rules that could be a barrier to potential customers. Their fees are relatively low. However, they have several disadvantages. They only provide a tight access to financial markets (only stocks or single currency instruments, limited choice of investments). Discount brokers cannot provide you an access to sophisticated product or investment strategies. Actually, they provide the minimum but at low price tag.
I will add the fact that with internet you can find your “perfect” broker. To find a tailored broker is more than possible nowadays. So make your research, take your time to choose the right broker because it will determine your whole future in investing world (Fees are very important as they decrease your return on investment). Remember, brokers make money no matter what if your shares are not doing well you still need to pay a commission on that trade.
When you found the right broker and opened an account with them, you can go to step 2.
Step 2: Getting closer to stock market.
Investing hard earned money scares many people and we get that. Hence, before making your first investment, you should learn the basics of financial markets and simulate some of your trades. Simulators are often displayed on broker’s sites, for free. Thus, you can experiment what it’s like to follow the news, make analysis and take rough decisions. You need to polish your analytical skills, don’t forget practice makes perfect. Investing is a long process no short cuts.
Why is it so important? Because you should not make your first investment as a stranger but as an intelligent investor. If you need help or advice you can contact the HNFC team. Our advice is free and we will be pleased to make finance a bit easier for you.
The "do your homework" step is skipped by way too many people. With the excitement of making gains some people go straight to the investment step without knowing what they actually doing.
It is a big mistake which costs you a lot money and stress. Be smart with your investments and you can avoid many sleepless nights.
Step 3: Select your first investment and build your first portfolio.
Now that you have the basic knowledge in finance, you can make your first trade. Buying a real stock is as simple as stressful. Keep calm and apply what you’ve learnt in the previous step, we all learning on our mistakes. Don't get sad if something goes not the way you have expected, it's normal.
One trade is not enough. You need to create your first portfolio according to your opinion on a financial market. Depending on your broker, you will have more or less options on investments.
So, take some time to think what are your thoughts on a stock market. Are you bearish or bullish?
Which stock exchange to choose? London Stock Exchange (LSE)? New York Stock Exchange (NYSE)?
Inflation level? GDP Growth? If you have answers to these questions then you have avoided many issues which most of investors will face when they start trading.
Luck is important but not everything in financial markets. You cannot buy a stock and then pray for its price to rise. Market are unstable, volatile and can be very tricky. Your portfolio will help you to increase your wellbeing but what is more important it will enable you to retain your wealth.
Your portfolio is your creation. It follows your investment strategy and your opinion on financial markets so we can only give you one advice...
DIVERSIFY! DIVERSIFY! DIVERSIFY!
Diversification is crucial for investment success, you want to make sure your portfolio can cope with different market changes and yet be profitable. If you need help on those problematics of portfolio construction and diversification you can contact HNFC. Also, you can check our diversified portfolio with research, so far it got 4.57% net return over 2.5 month. We think its not bad as on bank deposit you likely to get only 1% over a year with no access to your money.
HNFC would be pleased to help you to get closer with financial markets. Our team, composed of several members specialised in some sectors of the financial industry will help you to build diversified portfolio for your investment purposes. By contacting HNFC you insure yourself to get an Honest, Nifty, Flexible and Confident advisor for your future investment.
Thank you for your time.
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Written by Samuel Chaineau │with contribution of Vee Venski
Edited by Vee Venski
This article is not a promotion of financial investment. Investing money in financial instruments is risk-reward process. Losses and gains are part of financial investment process. Only invest money you can afford to lose.