Any beginners guide to investing is by its very nature a basic guide but it is important that anyone new to investing gets a few key points clear before they start. Here we will cover some of the essential points but please keep in mind that investment in the stock market is a complicated and potentially risky business.
One of the very first things to cover is the need for every investor to work out for him or herself a level of risk that they feel comfortable with. For some they will only sleep well if they are almost risk free while others are equally comfortable with some of the riskiest options known to man. Just remember that there is no right or wrong there is only right for the individual concerned.
As part of assessing your own comfort level you will want to feel comfortable that you can afford to risk losing the money that you are planning to invest. Obviously you don’t want to lose it but if you absolutely can’t afford to then you should look for something which carries a significantly lower level of risk.
Likewise it’s important to feel comfortable knowing that you should be investing in the markets for the medium to long term. That’s generally regarded as 5 years plus. If you need ready access to your money then go for something which won’t be as easily affected by outside events. While markets fluctuate and at times quite wildly they do tend to rise over time but that won’t help you if you need to get your hands on your cash the day after tomorrow and the market’s in freefall.
As with anything else it’s vital to understand the rules of the game and how they apply to the position you are planning to take. For example if you don’t understand stock market terminology you shouldn’t even think of investing. Even with a helpful stock broker it would be foolish to risk your hard earned cash by investing in something you don’t fully understand. There are plenty of good stock market dictionaries that you can find either online or as a printed book.
Once you’ve got an idea of the terminology you might want to consider paper trading even when you’re getting a broker’s advice. That way you will begin to get a feel for how things operate for yourself and that’s by far the best beginners guide to investing.