One of the biggest myths flying around about investing is that it is reserved for the rich. Whilst that may have been true years ago, it most certainly isn’t today. There are plenty of platforms and services that have made investing feasible for people from all walks of life.
This has increased the demand for platforms that help you get on your feet and choose investments in no time. From money market mutual funds to dividend investing, there are plenty of strategies a beginner can employ to start making profits.
An investment strategy is basically the mindset you cultivate that informs the type of decisions you’ll make in the market. A good investment strategy will minimize your risk and help you realize profits. A couple of questions to ask yourself before you begin investing are:
- How much do you want to invest?
- What are your goals?
When you are clear on these two questions, continue with the rest of the article and look through a few investment strategies suitable for beginners.
- Buy And Hold
As far as names go, this one is one of the most straightforward. The buy and hold strategy works best if you’re patient and willing to play the long game. Ideally, the buy and hold strategy only sees profits after an extended period of time of around 4 to 6 years.
For investors not willing to spend hours each day checking on their investment, this strategy works best. It gives you time to work on your regular job, spend time with your family and enjoy some hobbies. Due diligence needs to be done on the businesses you decide to invest in to ensure that the underlying business is all but guaranteed to perform well in the future. Once that due diligence is complete, invest away.
Also, the buy and hold strategy could help you avoid the stress involved in active trading and capital gains taxes that plague frequent trading. The major flaw in this strategy is your own mindset. If you can’t endure the ups and downs that appear in the market, you might end up making a bad decision based on your impulses.
- Income Investing
Income investing is a strategy that is said to bring one of the most reliable returns. It is a favorite amongst those that invest to have a steady stream of income. In income investing, you own investments that give you cash payouts. These cash payouts can come in many forms, the most common being dividend stocks, bonds, and real estate.
Depending on agreed-upon figures, part of the returns come in a hard cash payout. This strategy is advantageous as it can be used in conjunction with other strategies. For example, employing a buy and hold strategy along with this will potentially give you a large payout after a couple of years.
Income investments fluctuate less than their counterparts, making it a relatively safer strategy for those on a budget. These stocks also potentially increase their payouts over time, with no extra effort on your part required.
Although it’s safer, stocks are stocks. Thus, it may be inevitable for you to experience losses at times.
- Dollar-Cost Averaging
One of the things that scare people away from investing is the concept of ‘timing the market.’ It is the concept that makes investing seem like a high-risk endeavor. Yet with dollar-cost averaging, that wouldn’t be the case. It’s a strategy that practices adding money into your investment portfolio on a regular basis.
You may choose to invest every week, or every two weeks. Either way, you are spreading the risk over a long period of time. Instead of dumping your money in one entry point and bombing out from the get-go, this method can help decrease your risks and slowly expand your portfolio in a disciplined manner.
However, take note that you’re neither buying stocks at a high price nor at a low price. Thus, you might not be getting the best deal and are unlikely to enjoy the best returns with this strategy.
- Artificial Intelligence Advisors
For those that want to invest but have no time to learn the market intricacies required to make good investments, this choice is perfect for you.
Robotic advisors are platforms that manage your investments by using algorithms. They do all this for a minimal cost which gets taken out of your investment portfolio. Most of these platforms will have educational tools and material to help you get up to speed with investing. It ensures you’re not completely lost as to what is happening in your portfolio.
These are just a few of the different strategies out there suitable for beginner investors. In making money decisions, it’s essential to take your time, breathe and clear your head first. Investing smartly requires knowledge about what you’re doing, so starting with the low-risk investments indicated above would be a great option.