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Learning How to Invest Like a Pro

23 Mar 2022

Learning How to Invest Like a Pro | VI

The most realistic way to become wealthy is to invest.

We know, we know… many of us see investing as a hassle as it requires some capital and involves risks. But really, there isn’t an easy way out to get rich (unless of course, you’re talking about a huge inheritance or an illicit act). Although investing also equates to some risks, it can provide you with a good source of income when done correctly.

Doing it the proper way means understanding how investing works. Especially as a beginner, you cannot afford to make many mistakes as this is real money we’re talking about!

So how do you then start learning how to invest?

The process involves introspection before anything else. You ought to first determine your investor profile, how much risk you can take, and how much money you’re willing to invest.

All these come before learning which stocks to buy and which brokerage to use. But we’ll get to that later.

What type of investor are you?

Everyone is different. Following this same logic, each of us would also have a different way of investing that suits us the best.

Some would take a more active approach in buying individual stocks, while some would be more passive and decide to buy funds or ETFs. All of it depends on how much risk you are willing to take.

If you are a risk-taker, you can consider investing in individual stocks. Most people would not do this because it is very hard to predict which stocks would do well and which stocks wouldn’t. However, if you have done your meticulous research and is confident about investing in a few selected stocks, then this strategy would be ideal for you.

For the majority, and especially those who can’t take high risks, we like to diversify. This involves buying ETFs, having different stocks in the portfolio, and investing in mutual funds.

The amount of risk we take would be proportionate to how much we can profit. Hence, most of the time, the profits we earn would be much lesser than when we decide to take more risk.

How much risk you can take would determine what types of stocks you should buy and how much you would stand to profit.

However, it is very important that we only invest what we can afford to lose. If you do not know how much to invest, here are some things to follow.

How much should you invest?

Learning How to Invest | VI

Yes, you’re aware you should invest, but how much should you invest? Many people misunderstand that they have to go all-in as they would get it back anyway.

But as we’ve mentioned above, investing has risks. Thus, we always advise you to NOT invest all your money. Make sure you have something kept for the rainy days or in times of emergency, as the nature of man’s life is unpredictable and we don’t know when we’ll face financial troubles.

Remember this: No matter how safe an investment is, it will always carry risks. For example, 2021 was an unexpected year where most equities lost half of their value and many investments seemed to die out.

What if in this same year you get an emergency and you need cash? You’ll be doomed. So always leave something for the rainy days. Don’t invest what you can’t afford to lose.

Another way to determine how much to invest is by taking your income, subtracting your expenses, and dividing it by half. This way, you can find out how much you need for your expenses, emergency fund or saving, and how much you have left to invest.

The amount that you should invest depends on your risk tolerance and budget. At the end of the day, investing should be about growing your money, not reducing it.

How should you choose the right broker?

Most learning-how-to invest guides would focus on how to pick the right stocks, learning your risk tolerance, et cetera. What many people do not know is when starting investing, finding the right broker that suits your needs is very crucial to making a profit.

Some broker accounts have a minimum deposit requirement as well as transaction costs. Why should you bother about these factors? Simple, it’s because they affect your profits!

When checking which online broker to use, find one with no minimum deposit and has low transaction fees. Some online brokers even come equipped with services such as news, charts used for technical analysis, and much more to make your investing journey much easier.

Additional Reading: Best Investing Apps for Beginners: The Non-Negotiables

Which stocks should you buy?

Learning How to Invest | VI

As a beginner, you would make some mistakes. So, why not diversify your portfolio to ensure that the risk of losing money is lower? Sure you might be making lesser but it is always better to be safe than sorry.

By diversifying your portfolio, we mean choosing different stocks that you are confident in. It’s not about just choosing one stock from each industry.

As you are aware, the stock market is highly volatile, so we can never really predict what will happen next. To ride out the volatility, you should invest in stocks with strong fundamentals and wait for them to increase in value over time. This way, even if the market dips, you can remain confident that the business will perform well.

Likewise, make sure you don’t give in to the market noises. Perhaps you’ve heard everyone talking about the ‘next big stock’. Yes, it could be the hottest stock at the moment, BUT how much do you know about it?

Oftentimes, the market noise is really just noise. The “next big stock” can either shoot up to the sky or come crashing down. Without understanding what you’re investing in, you’re putting your money in trouble.

We hope you’ve realised one thing from all the explanations above. Investing is always about playing the long game and doing research. If you are doing anything other than that, it is gambling, and you’re certain to lose.

Do not gamble. Learn the proper method to invest and get access to relevant tools and the right community.

Allow us to guide you. Join us in our free two-hour investing masterclass.

DISCLAIMER

This article and its contents are provided for information purposes only and do not constitute a recommendation to purchase or sell securities of any of the companies or investments herein described. It is not intended to amount to financial advice on which you should rely.

No representations, warranties, or guarantees, whether expressed or implied, made to the contents in the article is accurate, complete, or up-to-date. Past performance is not indicative nor a guarantee of future returns.

We, 8VI Global Pte Ltd, disclaim any responsibility for any liability, loss, or risk or otherwise, which is incurred as a consequence, directly or indirectly, from the use and application of any of the contents of the article.