Tips for the New Investor – A Practical Guide

02
April

Investing often seems easy for the casual observer, but when that onlooker decides to become an investor, he or she often learns otherwise. Investors can buy a variety of financial instruments which all have their own set of trading rules and nuances that can seem confusing at first. This means new investors should enter the market with caution, taking their time to learn the ropes before they put significant sums of money on the line. They should also follow a few simple tips can help the new investor get a good start in the market.

Learn How the Market Works

Online trading simulators for stocks, options, forex, and other investments are available online. New investors can use these tools to practice researching their investments and knowing when to buy and sell. These simulators often have contests users can join to make the effort competitive and enjoyable. The good thing about these online tools is that the money isn’t real, so investors can feel free to test new strategies and make mistakes without having to suffer any losses.

Understand Basic Principles

Practical guidelines exist that help every kind of investor understand the risks involved with an investment and how to manage that risk. Investors should learn to research their prospective investments using online trading tools as well as print publications marketed to the financial community.

Read the Prospectus

Investors who buy into mutual funds should give the prospectus for that fund a thorough review. This document describes the historical performance of the fund, how the fund is valued, how it is managed, and what all the fees and other costs are that are associated with the fund. The prospectus also describes how to invest into the fund and withdraw money from it. It should also give an explanation of the risks involved with the fund. Every investor should keep in mind that the past performance of an investment is not an indication of its future performance.

Ask Questions

Before putting money on the line, new investors should get all their questions answered. Sometimes their broker can answer questions, but investors can also question fellow investors at local investor meetings. Most of the time established investors are more than happy to help get a new investor started.

Start Slowly

New investors might feel confident about their ability to choose winning investments, especially if they had a successful practice time in the simulator. The real market uses real money, however, so it’s best for new investors to get off to a slow start so they can learn the ropes before risking a lot of cash.

Be Responsible

Investors make their own decisions, so they should never blame a friend or family member for leading them into a bad investment. New investors will often make mistakes, so they should acknowledge them, accept them and learn from them. Investors should not be afraid to act on their own; a herd mentality can quickly ruin a new investor because the crowd isn’t always right.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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