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How to get started in investing

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Recent research found that 21 percent of traders and investors have less than a year’s experience; and 80 percent of those surveyed are interested in finding ways to actively build their wealth beyond their current income.

Investing is one way to build wealth, but it can feel like a daunting prospect as it’s often difficult to know where to start.

Nonetheless, there are some solid principles that you can follow, which could make your first investment a lot easier.

Invest in what you know

Before you start investing, it’s a good idea to think about the types of assets in which you’d like to invest.

Clearly, it will be most sensible to invest in something you are already knowledgeable about. You’re likely to know much more about these brands than someone picking stocks for a fund. For example, if you like gaming, there are a whole host of stocks you can choose – from NVIDIA to EA to Sony. Similarly, if you’re into fashion, brands like Burberry and JD Sports are publicly listed, so you can make an informed decision based on the products they offer.

Practice makes perfect

As a first-time investor, you’ll want to do some research to learn the basics, including the best time to buy and how regularly you should review your portfolio. There are several useful online tools for this such as the Motley Fool, Hot Copper or Finance News Network which also provide advice on the right shares to pick.

However, in truth, practice makes perfect and there are several options to help you learn in real time, while trading.

Some platforms, such as the one I use allow you to set up a virtual portfolio, which allows you to practice trading. The one I use lets you practice with $100,000 before depositing any of your actual hard-earned cash. You can learn the ropes of trading commodities, stocks, ETFs, indices, currencies and cryptoassets before starting your real portfolio.

Copy others to learn more

However, if you don’t feel you have the time or the knowledge to go it alone, you can enlist the help of more experienced investors like me. You would look on TripAdvisor before choosing a hotel or holiday, so why not ask for recommendations with investing too?

On eToro, there is a real community of investors who discuss trading and share knowledge and information. It operates just like a social network. You can ask Popular Investors (like me) questions about investments using the feed and have conversations with other users too. This includes discussions about which stocks to pick and the merits of various investing strategies. This is no different to learning other new skills in life; for example, you learn to drive through an instructor or an experienced driver before going it alone.

If you still feel you’re lacking confidence to invest alone, you can actually copy the trades of others. Popular Investors open up their portfolios to copiers, so that when we make money, you can too.

Diversify your portfolio

It’s important to maintain a diversified portfolio to hedge against any potential market shocks. For example, investing purely in tech stocks is not the best strategy as these companies are vulnerable to the same market movements, for better or worse.

Consider investing in different stocks from different countries; as well as other asset classes like commodities, currencies and even cryptoassets.

This could help keep your portfolio balanced and your returns steady.

Beware of hidden costs

Before choosing where to invest, it’s a good idea to research the types of fees that investment platforms charge. Unfortunately, a number of these will be less than transparent when it comes to the costs you could incur.

However, there are a range of new challenger brands offering investments at a low cost – just shop around before you sign-up. Things to look out for when choosing the right one for you include: what commission on do they charge for each transaction you make (buying as well as selling)? What is the minimum amount of money you need in order to start investing or trading? What spread do they charge (ie; the gap between a short position (selling) in one contract for difference and a long position (buying) in another)? And, what other fees do they charge such as depositing and withdrawing your money from the platform, account keeping or management fees etc?

You can invest from as little as AUD $50

You don’t need thousands of dollars to start investing. On many trading platforms, investing starts from as little as $50. To put this into perspective, that’s the same as you’d spend in a month on your daily morning coffee on your way to work.

You should always invest within your means, but money should not be a barrier to investing.

While it may seem you’re starting from a low base, investing is for the long-term and you can potentially make good returns over a long period of time, depending on market conditions even from as little as $50.

Plus, any returns you make you can reinvest to make more from your investments.

Have a goal in mind

Investing, big or small is all about making returns with informed decisions and having a goal in mind.

For example, when I started investing, I wanted to increase my family’s disposable income, to open-up choices for myself and my children. It helps to fund school holidays and gives us more freedom to enjoy our lives.

Having a regular goal in mind helps focus my trading strategy, which, in turn, is focused on long-term, sustainable returns.

Invest for the long term

It goes without saying that investment returns don’t pour in overnight. You’ll need to be patient to see your investment decisions pay off. As a guide, investing for a five-year horizon is a good benchmark.

This will also help tie-in with your goals, as mentioned above. You could be saving for a new car, a deposit for a house or maybe a nice holiday. Whatever your goal, patience is key.

Overall, investing is about building your confidence and knowledge. Stick with it and you could be a confident investor before you know it!

About Lena Birse

Lena Birse is a UK based blogger and contributor who manages the daily finances for her family, following the sale of the family business. She is one of eToro’s Elite Popular Investors and commentator on the eToro social feed.

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