Investing for the beginner can too quickly turn into a game of memorising market theories, charts, price algorithms, and other tricks. But that's not where the intelligent investor at the beginning of a career should be looking. Here's why ... and what the intelligent investor should be doing instead.
Investing for the beginner can be a frightening thing. You're going it alone, after all. In a traditional work setting, you have a clear set of tasks, you know exactly where your money is coming from, and you know your money will come to you reliably at a certain time.
When you're investing, you've got to accept a higher degree of uncertainty. It's you and your money against the world, right? Wrong, actually, and learning why it's wrong is one of the most important tactics involved in investing.
The world isn't your enemy. On the contrary, it's one of your most useful allies.
The key to investment is to understand exactly what you're doing. Too often, the world of investment can become abstract:
pound sums,
rates of return,
all of them mixed up by some strange alchemy into profit or loss
It's important to sometimes pull your head out of the clouds and look at the reality of investment.
When you invest money in a company, you're not just throwing it on some roulette wheel.
The company uses the money you put into it in order to operate.
If the company uses your money wisely, it grows, and the value of your investment in the company grows with it.
If the company uses your money unwisely, the value of your investment takes a nose dive.
So use your eyes and your brain. Before you invest in anything, take some time to understand just how your investment venture operates. If you invest in a tech company which is basically financially solvent and only needs money in order to research and improve existing product lines, then the company is using your money in order to compete more effectively in the marketplace. Effective competition means more profits flowing back to you.
Worse: You'll start to see losses as other companies begin to take over the market.
That's the key to investing for the beginner: Learn as much as possible about each of the different markets, and don't be swayed by charts and tricks. Understand where your money goes, and you'll see the result.
