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If you’re going to start investing in the stock market, there are a few tips that it would be useful to be aware of. Should you spread your investments, or keep them simple? What about ethical funds – are they worth investing in? Are there other alternatives to the stock market, and might they work better for you? What about investment funds – what should you know about them, and how do you find out?
Here, we’ll share a few tips that we’ve come across. We hope that they’ll be useful to any stock market beginners who are thinking of taking the plunge…
You might have heard about the value of having a diverse portfolio of investments. But what does that mean? And how can it benefit you?
Stock market beginners should know that, essentially, having a diverse portfolio protects you from any unexpected crashes or turbulence in a particular part of the market. Rather than risking their lot with one company or within one industry, stock market pros know that there’s value in making sure all your eggs aren’t in one basket.
Our tip? Look for companies and sectors that are ripe for growth, and that are protected against the fire-winds of an unstable economic climate. We never know what’s round the corner that could affect the economy (as we’ve already seen very clearly this year.) Because of this, don’t worry if they’re in completely different areas – this is a benefit! Of course, to make this work you’ll need to do your homework and keep a close eye on various things. More on that later.
Of course, you want to know exactly what your money is going to be supporting if you decide to invest in the stock market. If you’re investing in a fund, you should research carefully to find out the kinds of places that your money will be invested. Are you happy with your funds being invested in tobacco, for instance? If you have particular red lines, make sure you choose an investment fund that isn’t going to cross them.
If investing ethically is important to you, you might want to consider putting your money into an ethical fund. These funds are specifically set up to fund organisations with an ethical purpose, usually around the environment.
Lots of ethical investment funds support green energy, for example. You should look for ethical funds that invest in green solutions that have a strong potential for growth. We have an article all about ethical funds, which you can read here.
If you’re investing in a new type of industry that is almost guaranteed to grow exponentially within the next few years (artificial intelligence, for example), you’re on the right track.
You need to know enough about the industry, and the companies within it, to know where best to place your money, though. It’s time to get online, and read the blogs and up to date news related to the industries that you’re particularly interested in. Knowing what makes a sector tick and what can potentially affect it can mean the difference between a strong investment decision and an ill-informed one. Make sure you stay in the know!
If you’re investing in the stock market, and especially if you’re new to this kind of thing, it’s a very good idea to use an investment platform to manage your portfolio.
Of course, these brokerage platforms all charge a fee. There’s no hard and fast way to know which of the many investment platforms is the best for you and your money – only you know about your individual circumstances. This is why you need to research a number of things before you commit to using a platform. Look into the expertise that different platforms have, and how they work. Are they straightforward, or do you think that using them might end up being too complicated? What fees do they charge? Is this in line with other platforms? How will you contact them if something goes wrong? Do they provide guidance or support if you need it?
You need to think about all of these things before you commit to one specific platform, so again… do your homework! To learn more about investment costs take a look at our article that explains the difference between share dealing fees and platform fees.
Of course, not everyone wants to invest in the stock market – especially in the context of coronavirus and Brexit (remember those…?)
If you want to grow your money but you’re nervous about stock market crashes, or about the future in general, there are other ways to invest. Make adjustments or changes to your pension pot so that it can offer greater growth, for example, might be a good idea. It’ll take away the headache of managing your portfolio yourself, too.
In order to gain insight into where the prices are heading to and predicting currency exchanges, you will need to constantly keep an eye on the market and develop an analytical approach toward your trading strategies. You can start developing your overall perspective about the market by reading guidelines and tips, and following experts in the market.
Alternatively, you might want to consider a Self-Invested Personal Pension (SIPP). Investing in a SIPP means you’ll have greater control over your investments than you would with a regular pension plan. SIPPs allow you to invest in both quoted and unlisted UK and overseas stocks and shares, investment trusts, insurance bonds, property, and more.
Want out of the stock market all together? An ISA, where funds aren’t invested but can still grow, might be a good idea for you. We have some advice on which ISA to choose elsewhere on the site.
We hope these tips have given you something to think about when it comes to investing in the stock market. Do it right, and you could see the benefits quickly. Don’t rush, though – playing stocks and shares might be exciting, but it takes some skill and investment of time too!
Have you had experience investing, or are you a stock market beginner looking to get a foot in the door? We’d love to hear about your experience. Let us know over on the forums.
Inspired by ways to invest? Try these articles for more ideas about growing your wealth with ease!
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Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.