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8 Tips for Learning the Ropes as a New Investor
Trying to make your way as a new investor is both easier and more daunting than ever when one considers the size of the markets, the ferocity of the competition and the digital skills that are now required to be an effective investor.
Don’t let these challenges dissuade you, though. Below are eight tips to learning the ropes as a new investor.
Start Following the Experts
If you want to understand how experienced people see and read the markets - and if you are a brand new investor, you definitely should - the best place to start is by subscribing to one or more of the newsletters or research services put out by investors and pundits who have been observing the markets and have been in the industry for a long time. These are usually weekly services that provide a breakdown of picks and market trends, as well as the rationalization behind the analysts’ thoughts and opinions.
You don’t necessarily have to start taking anyone’s advice right away, and it is probably best that you just carefully observe for a while before actually putting any real money into the markets. But when you read real investors holding forth on something they are well-versed in, you begin to get a feel for how people talk, what they look for when evaluating a particular asset and what turns them off an investment.
Use a Simulator
A simulator refers to a mock trading account that allows you to watch and interact with the markets in real-time - investing fake money of course - with the intention of learning the basics. The basics include important terminology that you will need to know; the technical side of investing, including how these platforms and their dashboards work; how to keep an eye on the micro and macro trends affecting price swings; how to build a well-balanced portfolio; how to determine your risk profile, and many other crucial aspects of investing.
When you register for a brokerage account at any financial institution, online or otherwise, you usually get access to a mock trading account that you can use as much as you like. There are also many that you can use for free online that don’t require you to sign up or be a member. Start putting fake money into the stocks and industries you are interested in and where you would eventually like to invest real money and you will be much more confident when it comes time to put actual capital on the line.
Develop Your Information Diet
If you want to be a savvy investor, you have to stay on top of market trends and information. This doesn’t just mean with respect to the companies and assets you are invested in, but you need to be attuned to capital markets in general. Before the internet, you had to either be an industry insider to get real insight into what was going on, and most retail investors were limited to reading the business and financial sections of the major newspapers to inform their investment decisions, but now the information and learning possibilities are endless.
There are also great applications out there like Feedly, Flipboard, News360, Pocket and Panda that allow you to comb the internet for the kinds of news and information sources you would like to see and read on a daily basis and create customized feeds that collect all of those stories and headlines into one easy-to-access space.
Take a Free Course
If you have the time and the motivation to learn on your own, you should also consider one of the many free investment courses online. A number of colleges and universities around the world offer free introductory courses, as do popular investing sites like Investing 101, Future Learn, Wealthsimple, SkillShare, and many others. These can be done on your own time and provide you with the technical background necessary to really start familiarizing yourself with the markets. If you want a certificate out of the experience, these can usually be purchased for a small fee.
Read the Classics
There are innumerable books out there on investing that you can and should be reading if you are serious about making investing a part of how you make a living. Starting with the classics is always a good idea and there is something there for every kind of investor, for all different purposes and a variety of risk profiles.
Browse Investor Forums
If you want to get a feel for how investors talk and read the markets, another good idea is to spend some time in the places online where investors congregate. These include places like Reddit, Twitter, and the comment sections of online media.
Subscribe to New Investor Podcasts
A lot of the digital media consumed nowadays are videos and podcasts and podcasts, like online newspapers, magazines and periodicals, should also make up part of your information diet. There are many great investing-related podcasts out there and the most convenient thing about these is you can watch and/or listen to them while you are doing something else. Instead of a workout playlist, why not listen to an investor podcast for an hour at the gym?
Find a Mentor
If you are fortunate enough to have access to an experienced investor while you are learning the ropes, you should try and absorb as much knowledge from them as possible. This could be a friend, family member, or colleague, but the idea is that you have someone in your life to act as your guiding light when you start to venture out and make your own investment decisions. You can run your ideas by this person, get them to play devil’s advocate when you are making a case for or against a particular investment and benefit from their successes and failures as an investor.
When you first wade into the world of finance and investing, it can seem quite overwhelming. When you consider that the markets are a zero-sum game and that you are up against people who have been doing this for their entire lives, it can be easy to think that it is too late to start or that acquiring that kind of experience and knowledge is an insurmountable task. You need to get rid of those thoughts, but most importantly, you need to make sure you are taking full advantage of all of the resources you have at your disposal that will make you a competent and savvy investor.
About the Author
Tim Garcia is a freelance writer covering finance and education and has been an industry insider and observer for over 15 years. When he is not reading and writing he is usually in the kitchen trying out new recipes.