Are you a stock market novice? Do you want to achieve your dreams of becoming a stock market guru? Here’s one way to plan investment tips for beginners. Do not think you are a beginner. 

This is because when you start learning how to trade stocks, you become your market expert, research director, and money manager. So, regardless of what the market does, educating yourself about how the stock market works and where potential trading opportunities exist is always good. 

But before you look for investment tips for beginners, here are some aspects you need to look at: 

What to Consider Before You Start Investing Money?

1. Emergency Fund:

Make sure that you have an emergency fund set up. This fund should help you during emergencies and cover your retirement plan. You can start this with a tiny percentage from your paycheck to get the ball rolling. Then as your income increases, keep updating your selection and contribution level. 

2. Figure Out Your Monthly Expenses:

You need to have a strong understanding of your monthly expenses and spending. This will help determine how much you can invest. Plus, it will also show you where you can cut back so that extra money can go towards future investments. 

3. Pay Off Debts:

If your company has a 401K and company match, take advantage of this irrespective of your debts. This is because you could lose compound interest over the years, so the earlier you start, the better. Also, knockdown debts, like high-interest credit cards, before looking at investment tips for beginners. 

Now that you know what to consider before investing, Let’s look at the top 15 investment tips for beginners.

[ Learn Complete About What is An Investment? ]

Top 15 Investing Tips For Beginners

Here are the top investing tips for beginners:

Investment Tip #1. Understand the Fundamentals:

Before you jump into investments and portfolio balancing, start by understanding basic metrics like revenue and earnings per share. Publicly traded companies begin to report earnings and other financial details, including quarterly EPS. So, if you are considering stocks, it is good to check the investment company’s recent earning history and compare that with other forecasts.     

Investment Tip #2. Set Investment Goals: 

When looking at investment tips for beginners, start by determining your investment goals. When you open a brokerage account, the first thing they ask you is your investment goals. If you are beginning your career, your investment goal may be increasing your bank balance. But if you are older, you may want to increase your income and protect your wealth simultaneously. Investment goals include buying a house, planning a retirement fund, or saving money for your child’s university fees. These goals are flexible and keep changing over time, so make sure that you review them periodically. 

Investment Tip #3. Set Your Investment Style: 

Some investors have an active hand in managing their investments, while others prefer setting it and then forgetting about it. Your preferences can keep changing, but start by deciding your initial approach. If you are confident about your investment skills, try managing your portfolio independently.

Investment Tip #4. Keep Your Costs Low: 

Mutual funds, ETFs, and index funds are great options to bring diversity to your portfolio. But, when planning your investments, you need to consider the fees. While this may seem like a trivial topic, most beginners do not take into consideration the payments. For example, mutual funds are mainly actively managed, but all the brainpower comes with a cost. They may charge you 2% or more annually; over 20-30 years, it does add up. On the other hand, index funds usually need lower fees, but you must manage your portfolio alone.  

The best compromise is ETF portfolios - a diverse portfolio with low fees but actively managed and carefully monitored like mutual funds. So, it offers the brainpower of a mutual fund without high costs.

[ Related Blog: How to Invest in Share Market For Beginners? ]

Investment Tip #5. Never Invest in Something You Don’t Understand Personally:

This might seem rhetorical, but you will be surprised how easily people fall into the trap when money is flashed before them. One of the best investment tips for beginners is to invest in things you understand. Read about the history of your investment, the company, the type of stock, etc. Do not blindly follow the herd in hopes of striking gold.

Investment Tip #6. Automate Your Investments: 

Another way to get help is by using Robo-advisors. These automated, hands-off options cost less than a financial advisor. Once they have your goals, risk tolerance levels, and other options planned, they can automatically make investments for you. 

Investment Tip #7. Don’t Be Afraid to Ask For Help: 

If you are unsure where to invest and the type of stocks to invest in, contact an experienced financial advisor or broker to help make investment decisions and manage your portfolio. These are the perfect investment tips for beginners, as you may not have the experience and need help. Learn to Diversify and Reduce Risk.

Investment Tip #8. Use Technical Indicators to Spot Trends:

Marketing professionals use chart patterns, trading statistics, and other technical indicators to help buy and sell stocks. These professionals study ‘momentum’ readings (like how fast or slow a price moves) and try to spot price-changing trends or any trend that may reverse. The best investment tips for beginners is to check the direction in which a stock moves and where it might be going. One handy tool to identify these trends combines the simple 3–day moving average with the 10-day exponential moving average. 

Investment Tip #9. Panic Selling is a Sure Way to Lose Money: 

In certain situations, when the market is down, or you start seeing your investments lose money, you may want to sell your stocks. But that is a surefire way to lose your money. It is easier to panic sell when everyone is fearful, and all media headlines make it sound like the world is about to end. But do not give into this panic selling. The market always recovers.

Investment Tip #10. Reinvest Dividends and Capital Gains:

In the initial stages of investing, try to reinvest dividends and capital gains automatically. This will help you build your portfolio and keep the compound interest growing to get high returns in the future. Also, reinvesting enables you to buy shares as the price swings from high to low.

[ Related Blog: Introduction to Stock Market ]

Investment Tip #11. Index funds and ETFs Are the Best Places to Start Investing: 

Picking stocks individually is a complicated process and puts you at risk. Instead, look at investing in index funds like S&P 500. These low-cost stocks offer better exposure to every sector regardless of what cash you started working with. As you keep building your portfolio and money, dabbling in small individual stocks is okay. One of the best investment tips for beginners is to stick with ETFs and index funds. Both keep low fees and help diversify your portfolio. 

Investment Tip #12. Don’t Complicate Your Investing: 

One of the best investment tips for beginners is you keep your portfolio simple and easy. When delivering the best results and bringing in diversity, less is more. For example, one stock investing strategy made famous by the Bogleheads is the 3 Fund Portfolio. This includes investing in just 3 low-cost index funds: 

• US Equity Fund 
• Bond Fund 
• International Equity Fund.

While this is not written in stone, the central concept is to maximize ROI without an overcomplicated portfolio. 

Investment Tip #13. Get to Know Your Risk Tolerance: 

Before you start investing, find out what your risk tolerance is. Stocks are devised in multiple options, such as large capital stocks, value stocks, small-cap stocks, and aggressive growth stocks. They all come with different risk levels. So, once you have your risk tolerance in place, you can set investment goals based on stocks that complement the goals. 

Investment Tip #14. Compare and know about Online Brokers:

Before you start making online investments, the most crucial step is to find an online broker that fits your financial goals and personality. All major online brokers offer $0 trading on ETFs and stocks, while many offer $0 commissions on multiple asset classes. Some of the best trading platforms provide lower fees that are transparent. They also offer technical research tools with a wide range of investment options. 

Investment Tip #15. Stick to Your Goals:

Markets, at the end of the day, are run by humans. This means that all emotions like fear, anxiety, and exuberance come into play. Markets are equally volatile - they can go up or down or even sideways - sometimes for no reason. So, the best investment tips for beginners are to accept that they cannot be controlled and not make emotion-driven decisions. But it is good to plot your short, medium, and long-term goals and stick to them.

Conclusion

As a new investor, planning your investments can be a bit daunting. But the best investment tips for beginners that you need to follow are understanding the different terminologies and planning your goals. Once you have these in place, follow our 15 tips to help you make the best investment portfolio available.