5 Biggest Challenges First-time Investors Face
Investing is intimidating enough for first-time investors without the recent stock market uncertainties. But to invert the old adage: what goes down must come up. Besides, smart investments can take a long time to become profitable. Investing is a long-term game.
If you’re a first-time investor, we’re here to acquaint you with the biggest challenges you might face.
Learning the Basics
The Internet is a hodgepodge of suggestions. Books are better and trusted sources of information where you can systematically begin to learn the basics. You might want to look into books such as Benjamin Graham’s The Intelligent Investor, Paul A. Merriman and Richard Buck‘s First-Time Investor or William J. Bernstein’s The Four Pillars of Investing. You can even find workbook-style books to help you along the way!
Not Having Enough to Invest
Even if it’s “spare change”, you can invest something. This is a real challenge if your budget is tight. At this point, though, it’s a matter of getting to grips with your finances and finding where you can get those extra few pounds. Then, accumulate. If you only have a small amount you can invest, you can look into partial shares. Yes, these exist.
Checking how your investments are doing daily or weekly will make you go crazy. But even in the long run, you’ll notice some gains and losses. Seeing losses might get you panicking. Here’s our advice on this. (1) Don’t fall into the sunk cost trap - if you see values dropping significantly in a short time span, sell and invest in something else. (2) Avoid the sunk cost trap entirely by setting investment goals e.g. to see a 5% return on your portfolio over the next year. If you don’t achieve it, reevaluate your plans.
Not Knowing Where To Invest
You don’t want to have all your eggs in one basket, but investing in too many options can also lead to negligent returns. It’s best to pick 2-3 options to invest in and stick to them. Investment funds and trusts are generally cheaper to buy than stocks and can help you diversify your portfolio. Company stocks tend to be illusory in that a company can seem like it’s doing great on the outside, but on the inside, it might be falling to bits. When starting, it’s better to stick to a more stable option.
Finding Help and Support
It’s always good to get some advice from more experienced investors or professional financial advisors. You can find comprehensive lists, along with free quality advice on sites online. But be careful. Things can go wrong even when you have a professional by your side. In that case, we recommend you have good solicitors on hand, like MJW Law, who have experience with professional negligence claims.
It might seem like a rocky road ahead, but, armed with the right knowledge, adequate support and planning, you’ll manage to find your way through the jungle of investing. Good luck!