Investing For Beginners Introduction

 

Investing for beginners can be confusing at first because they have so many unanswered questions. How does Investing work? Is there risk involved? What can one invest in? What are some investing principles? this article will answer those questions and explain investing for beginners to clearly understand the basics.

Before we get into these questions and their answers I want to clarify that this article’s only purpose is to provide you with basic investing knowledge. Not to promote any one kind of investing market. Although I will be using some of these markets as examples. Now let us get to answering these questions, shall we?

 

How Does Investing Work?

 

Investing is putting your money into something that you expect to increase in value so you can sell it for capital gain. For example, if I have one dollar and I buy a Crypto-Currency coin that costs 0.10$, I get 10 of these coins for my one dollar. If other people buy more of this type of coin AFTER I buy it, my coin price will go up. However, if people sell their same coin the price will go down.  After buying something it can be sold back to the market whenever we choose to sell it.

Examples of the coin price rising and falling: If enough people buy that coin for its price to reach 1$ and I have 10 coins, I can sell them for 10$. If however, enough people sell the coin price drops. If it drops to 0.05$ and I have 10, I can sell them for 0.50$.

Usually what is beneficial is keeping whatever it is you bought until there is profit in selling it. Though we have the option of selling it even when it will grant us less money than what we originally put into it. I would personally not advise doing this unless you need a chunk of your money back.

I want to clarify Something. Every time you sell, someone else buys. Every time you buy, you’re buying from someone else selling. So every trade equals 1 seller and 1 buyer. What causes the market to increase and decrease is supply and demand. If there are more sellers than buyers, the price will drop. If there are more buyers than sellers, the price will rise. The financial market is a constantly struggle between the buyers wanting to buy cheap and the sellers wanting to sell expensive. Whichever group is smaller tends to win.

 

Is There Risk in Investing?

 

Yes. Investing can have the risk of your money’s value decreasing due to people selling the investment you bought. Although risk in investing can be minimized by researching your investment and predicting its future; seeing what is currently happening and what has happened in the past with what you are investing in. Examples: If I see that there is going to be an increased need for oil soon, I can invest in it due to predicting its price will most likely go up. Another example would be a CEO of a company said some controversial things. Therefore most likely the stocks of his company are going to decrease in value.

Always research what is going on with the product, company, or crypto-currency you will invest in. Also research world events that may surround and affect its current situation. That way you are way more likely to reduce risk in your investment.

Investing risk can also be reduced by diversifying the capital you are planning to invest into multiple investments instead of putting all your money into one investment. Examples: If I have 100 dollars I want to invest, instead of putting them all into oil I will invest 50 into oil and 50 into silver. If I have 58 dollars, Instead of putting all of it into Tesla stocks, I’m going to invest 34 in Tesla stocks and the remaining 24 in bitcoin.

 

What Can One Invest in?

 

There are multiple financial markets and options to choose from. However, in this article, I’m only going to mention the three options that are good for investing for beginners. These include stocks, crypto-currency, and commodities.

 

Stocks

 

The Stock market is where you can buy ownership stakes in a publicly traded company. This ownership of the company is a very small piece of ownership. Examples of companies listed on stock exchanges include Facebook, Tesla, and Microsoft.

 

Crypto

 

Crypto-Currency is a digital/virtual currency one can buy online. Examples include Bitcoin, Dogecoin, and Ethereum.

 

Commodities

 

Commodities are objects with value that can be used to trade. They are often usable items. Commodities can be used by investors to invest. A commodity investor can buy physical commodities, companies that work with commodities, or industry specific index funds. Examples include Cotton, gold, lumber, and oil.

 

Some Investing Principles

 

Investing principle 1: Buy low, sell high. Buying anything when it’s low gives you more value for money. For example, if Dogecoin used to cost one dollar each, but now has dropped to 0.50$, I can buy 2 Dogecoins for the price of one. Therefore in the future, if Dogecoin’s price increases, I can make more money due to having more Dogecoin. Sell only when its price is higher than when you bought it so you can make a profit. If you’re going to need your money back soon, you should not invest it.

Principle 2: Don’t be scared of red. New investors are often scared when they see their investments fall, however, do not panic sell 10 minutes after you invested as you will lose money. Instead, I suggest holding onto your investment until it rises higher than the price you bought it at for profit. Though this requires patience, it can take a long time and does not always happen. For example, I made some money with a crypto-currency coin that was falling a lot after I bought it. After 6 months it started rising rapidly and made me 3 times my money. If I had panic sold, I would have lost a lot of money. As Warran Buffet said, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”

Principle 3: Don’t put all your eggs in one basket. Diversify your portfolio to reduce the risk of your capital. By investing your capital into different things, if one of them fails due to having less money in it, your loss will be reduced. While also increasing the chances of one of your investments succeeding.

 

Final Thoughts on Investing for beginners

 

When it comes to investing for beginners this article covers the very basics someone needs to know before they start investing. I hope you learned something you are going to use here, whether an investing principle or the basics. I wish you all the best in your investing journey!

 

Resources

 

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