Do you want to enter the world of investments? In this article you will find the nine principles to start investing in an informed way
Want to start investing but don’t know how? In this article, the experts of XTB - a regulated broker, fourth in the world by number of active customers - have summarized nine guidelines for approaching investments in an informed way.
Develop an investment plan based on your goals
If you want to develop a solid investment strategy, examine your financial condition objectively and concretely. Setting a budget can help you track your outgoings and determine how much you can set aside to invest.
Review your investment strategy on a regular basis, especially if there is significant market movement or if your financial condition changes (for example, if you get a raise or your expenses increase) and you need to make adjustments necessary changes.
Assess how you feel about risk taking
Due to the risks, some of your investments may not work out as you had hoped.
The general rule is that potential return increases with risk. Several strategies can be used to reduce the risk, but first you should determine how much you are willing to tolerate. To put it another way, you have to decide how much of your investment you are willing to lose if something goes wrong.
Since different asset classes behave differently, the instruments you choose to invest in will largely determine the level of risk. For example, while bonds are thought to be less volatile than stocks, stocks often outperform them. Cryptocurrencies on the other hand, being very volatile, involve greater risks and possible rewards.
Maintain sufficient portfolio diversification
The rule is one: never put all your eggs in one basket.
To reduce risk, diversifying your portfolio is a fundamental strategy in investing. Your portfolio should be built around your level of risk tolerance. For example, in the case of high risk aversion, your portfolio should contain more bonds than stocks and no cryptocurrencies. Remember to adjust your portfolio frequently to keep it in line with your risk tolerance because the macroeconomic environment is subject to change.
Select the financial products according to your needs
Most of the time, you have to select a broker to start investing. Investment assets (such as stocks, bonds, investment fund shares, crypto-assets, etc.), fees and services offered by various companies may vary.
The choice of the financial intermediary to rely on, for one’s training and for investments, is fundamental: choose a regulated and globally recognized broker such as XTB, allows you to access complete and free training, as well as benefit from greater security than unregulated institutions.
Reduce investment costs and tax obligations
As mentioned above, you may be charged differently for the services of various investment businesses. Your earnings will be higher if the fees are lower, but keep in mind that there are other factors to consider when selecting an investment activity.
Use tax breaks on investments if your legal system allows it.
Use safeguards to reduce the likelihood of losses
Use other risk reduction strategies in addition to diversifying your portfolio. Use stop-loss orders or take-profit, and if you are unsure of your financial acumen, consider using services that may help (such as advisors).
Consider the information provided to you with caution
Make sure you choose your information sources wisely. Make sure the media you follow on social media is trustworthy. Financial influencers and some publications with lower reputations may be motivated to fact manipulation. Also, users of forums and social media may have different goals than yours, such as trying to make money at the expense of their supporters. For example, the promotion of certain assets by these public figures could be an indication of a pump and dump scheme.
Remember that if something seems too good to be true, it probably is.
The secret is knowledge
There is always something you can learn about investing or the financial markets that could be useful to you, no matter who you are or what you do. Continuously invest in your training and never stop learning.
Take control of your emotions
Markets can be volatile, but not as erratic as the news around them. Keep your emotions from compromising your judgment and analysis. And proceed with caution.
Always remember to consider the risks
Please note that information or research based on historical data does not guarantee future performance or results. Any opinions, research, analyses, prices or other information provided under the heading of general market commentary do not constitute investment advice. Investing is risky.
Original article published on Money.it Italy 2023-02-07 15:00:31. Original title: Le nove linee guida dell’investimento