How to Invest: Step by Step Process for beginners in 2020

What does it mean to invest? Investment according to a financial point of view, simply means to channel money into an idea expected to yield profit later in the future. Investments could be small scale, such as buying landed properties expecting the value to appreciate in future, or large scale, such as funding a little business startup expecting to generate your profit from shares sold during an IPO (initial public offering).

Basically, anything you commit money into, expecting to get back your capital and profit in the near or distant future, signifies an investment. Now, it is important to note that investment could go badly and we end up losing all or most of our capital. The act of doing this is referred to as incurring a loss. If the investment wasn’t s great one, a Waterloo is what should be expected for us to come across.

It is expected to note that most investments come to a gruesome end. But an investor with the right idea on how to go about the channeling of his or her money is most likely to succeed than fail. There are some important guidelines to help you watch your steps in the investment race.

  • Know The Product
  • Invest Early
  • Get Rid of Sentiments
  • Take Calculated Risk
  • Always be Updated

Know The Product

This is the first, most important rule of the day. Never run into an investment without proper knowledge of what you are getting into. You should always do proper research before heading to an investment portfolio. Lack of knowledge is an investment that just means you are like an airplane trying to hit the tarmac with a blind pilot in the cockpit.

Such an airplane is bound to crash as the pilot can’t even see what is going on, he is being told what to do by experts in the terminal but, key decisions to be made by him alone are not possible. Hence, the inevitable crash. That is exactly how investing looks like. Experts could put you through, but can’t always be there for you.

Proper knowledge of the product you are buying helps you to use it properly, preventing unnecessary damage right? So does a good understanding of your intended investment help you weigh its pros and cons from a broader perspective? Let’s say, for instance, an individual decides to invest in the foreign exchange market.

Such an individual would have to understand the terms involved and learn how to operate indicators that help paint a clearer picture of where the market is headed. This requires lots of research, and failure to do this will have difficulties discovering proper market trends. Always do your research properly, it puts the power in your hands.

Invest Early

We have all heard of the ancient adage “the early bird gets the worm.” It’s best to invest when you can get the big slice before others key in to struggle for the leftovers. This is the best advice given to investors who buy shares in a company. The best period to invest is before the company goes public, then you can sell off your founder’s stock during its IPO and make your profit.

Another great idea about this modus operandi is that, you are never there to follow the latecomers to go through heartbreaks provided the company slips into recession. If you wait for a company to stand completely so you can be sure of its stability before buying a stock, believe me, you invested at the very wrong time. Stocks are sold really expensive then, and the price of individual stock creep gradually.

Therefore, to make a huge profit would take a really long period of time, and would require you to spend a whole bulk of the money to acquire more stocks and profit. If the company goes through a really challenging year, the price of stocks could drop below the buying price, leading to a loss on your own part. Sometimes, it may bounce back to a price still lower than what you bought and maintain this range till an unforeseeable future, sealing a loss as your fate.

Get Rid of Sentiments

Sentiments work like a charm in our social life, endearing us to people and painting us as humane. But, in the business world, this is a humongous weakness. It makes an investor make irrational decisions. Sentiments could be the reason an investor loses all capital and goes home with nothing.

One of the first rules while investing is to never get attached to the investment. Ideas or concepts that had always captivated you does not mean it spooks the interest of the greater masses. Therefore, even if you would like to pump funds into such, steer clear because it may end up being your Waterloo as a result of shallow sentiments. 

The investment universe is a profit and loss system only and nothing more. If the profit keeps growing, remain longer, if it begins to maintain the direction of a loss, cut losses and go. Being emotionally attached could lead to false hope and true loss.

I know it is painful to exit an investment with a loss, but exiting early means you still have part of your capital before the major crash, half bread they say is better than no bread at all. To invest properly, one must cast all forms of sentiments aside, and develop a mindset that is business inclined.

Take Calculated Risk

Here is an inspirational quote to live by, “the greatest risk in life is not taking a risk at all.” Nobody wants to live in the “what if I had,” that feeling of raw uncertainty because you feel and opportunity just eluded you. That is what happens when you play it too safe in life.

Life is all about the risk, yes, but this should be a calculated risk. It doesn’t have to be correct a hundred percent of the time, but it gives you an opportunity to leave your comfort zone, try something new, and watch it blossom if the tide is right. 

Investment is always about risk, those who reap the real profit and less loss, always research properly to give themselves an edge, then go head-on into the investment. Doing proper research helps you eliminate some unforeseen risk that is dependent on you, hence the term, calculated risk. It is better to have tried than to wish you had tried.

Always be Updated

For one to be updated, they must be in contact with current information. Information is key, so you better get the information. The information provides knowledge, knowledge in return provides power. There is an old adage that says “the pen is mightier than the sword.” According to this adage, the sword denotes strength as it is a weapon of the bold and mighty.

The pen, on the other hand, denotes knowledge, the pen is the wise man’s tool. But it clearly states that having a pen trumps a sword, so possessing knowledge, puts you at a higher advantage than courage.

Now in the business world, you always have to keep yourself updated, so that the next best thing doesn’t elude you. Keeping yourself updated makes you a step ahead of the world and offers you time to be flexible, and shift to adapt to the world’s changes.

Conclusion

Investment is a core necessity in other to acquire assets and overcome financial liabilities. But, this should be done effectively to avoid a fall into a financial abyss. The steps listed above are my thoughts after in-depth pondering, and research on the right guidelines to be duly noted when investing one’s funds. I hope this serves you well, thank you.

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