Thanks to apps such as Robinhood and Binance, more people are getting into financial trading. However, most new investors don’t necessarily know the ins and outs of the process, which can land them in hot water.
In this piece, we’ll provide a few tips for how to succeed in these financial markets while protecting your hard-earned money.
Learn To Save
There are plenty of apps that claim they can help you save –– and we’re not saying that they’re wrong! However, it’s a good idea to learn how to do all of this the good old-fashioned way as well: with paper, a pen, and your favourite calculator. Our post titled ‘How To Improve Your Savings Habits And Save More Money’ covered some tips already for things like drawing up budgets, tracking spending, and learning how to cut costs on daily or regular expenses. These strategies make or a good start, and once you’re confident in your saving, you can dig deeper into trading with an extra financial cushion.
Set Investment Goals
You are the investor, so you call the shots. You can decide how you want to set up your goals, but remember to follow the SMART standard explained by MindTools. It stands for “Specific, Measurable, Achievable, Relevant, and Time-Bound,” and each characteristic helps you make sure that you can really reach those goals in the allotted amount of time. Setting goals also helps investors look at the bigger picture rather than panicking during every dip and selling out before the prices rise again.
Practice
While it’s true that practice makes perfect, you don’t want to practice with real money (yet!). The best and most common way to practice and get the hang of trading is by way of demo accounts. These accounts are characterized by FXCM as being full simulations of actual trading markets (concerning stocks, forex, and even commodities). You can choose what market you’d like to practice with, and spend time getting to understand how it works, how volatile it can be, and what it’s actually like to execute trades in real time.
Check Your Risk Tolerance
Deep down, you’ll probably be aware quite early of how much you’re able to invest, and how much is too much. But it’s still important to give this careful, honest thought. Be sure to look at how much you can afford to invest without cutting into the money you need in order to pay your bills. Some argue that monthly expenses should not exceed 30% of total income; The Balance recommends setting 30% aside just for rent. Whatever the case, consider your specific budget, and how much you can risk setting aside for investment alongside normal expenses. Naturally the money has a chance to grow, but the amount you put in initially is still essentially a product of risk assessment.
Do your Research
The financial market can change from one day to the next (or even in a matter of minutes). It’s recommended that you stay on top of things by following relevant news, watching financial news channels if you have access to them, and these days –– perhaps most of all –– even listening to up-to-date podcasts. Not only do these pods keep you, well, up to date, but the good ones also teach you tips and tricks that will help you make the most sound decisions regarding your investment portfolio. U.S. News & World Report highlights “Fifteen Minute Financial Advisor,” “Invest Like The Best,” and “The Meb Faber Show” as some of the best, though a simple search through your preferred podcasting app will give you plenty more options to sift through as well. Try a few and stick to your favourites – but make sure to have more than one. Branch out and make sure you’re listening to a broad range of experts.
Financial markets can offer excellent opportunities to make some money and help build your nest egg, but success does require research and prudence. Keep your ear to the ground and you’ll do just fine.