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What are the Best Tips for a Beginner Investor?

Article Details
  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 15 September 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Investing is a great way to create personal financial stability as well as generate resources for use with specific projects like funding a college education. Since there is a great deal to consider when making investments, it is important that a beginner investor take the time to prepare properly before ever executing that first trade. In order to manage investments wisely, the novice should learn the terms used in the investment world, how to read market activity, and where to go for advice before choosing to take on any type of investment.

For a beginner investor, one of the first steps is to become familiar with the most common terms used in various markets. By understanding what is meant by buying on margin, a bearish market versus a bullish market, or a futures contract, the new investor is better able to identify what types of tools and strategies are a good fit for his or her personal investment style. One of the best ways to gain this knowledge is to identify an established investor who is willing to function as a mentor. Another approach is to work with a broker that has a reputation for aiding new investors in finding their way through the various markets, helping them learn terminology as they go.

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Among the tools for investors, the ability to understand what is happening in the marketplace is extremely important to making the right trading decisions. A beginner investor must learn to look beyond the obvious and relate today’s events with how similar events have impacted different investment options in the past. It is also important to consider where today’s circumstances will take the market tomorrow before attempting to engage in buying and selling shares. Many brokers can help with this process by supplying the beginner investor with what is known as a demo account. This essentially allows the new investor to execute trades and see where they lead without actually risking any money. The demo, or simulation, accounts track what would happen to the investor’s portfolio as a result of the trades, making it possible to get a better idea of what works and what does not in a given set of market conditions.

A beginner investor must realize that even the most seasoned of investors rely on reputable sources of information as part of the investment process. This means identifying analysts and other industry experts who provide detailed breakdowns of what is happening with a given investment opportunity and what is most likely to happen in the future. Brokers can often help investors identify which analysts consistently provide solid information as the basis for their projections. By comparing the projections of different analysts, and making note of the reasons behind those projections, even a beginner investor can make a more informed decision and stand a good chance of earning a significant return for their efforts.

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