A beginner guide on investing

TRICIA KISSOON

Investing can seem intimidating, especially for those who are new to it.

But the truth is, investing is a lot simpler than it may seem. For beginners, there are two broad options available to get started:

– Investors can choose to solicit the services of an expert to do the required work. This can be done simply by investing in a mutual fund or having an investment advisor do it for you.

Both arrangements have merit, but you should speak to an advisor to decide which one is right for you.

– Beginners who wish to go at it alone may find merit in the following principle: invest in companies you know, companies who operate in areas you are passionate about, or companies whose products or services you patronise. By doing this, you are ensuring that you are always well-informed about your investments. This, however, is only part of the job as an investor also needs to determine if the price they are paying for an investment is a good price.

A good asset can be bought for a bad price. In navigating this part of the process, a new investor should utilise the services of advisors who provide research and valuations on various assets. In our local market, some providers offer this service free of charge to clients.

By employing these basic principles and familiarising oneself with a few key concepts, anyone can start investing and potentially build wealth over time.

In this article, we break down some of the most important concepts and strategies you can use in getting started.

First, let's talk about what investing is. At its core, investing is simply the act of using your money to buy assets with the hope of earning a return on your investment.

Those assets can take many forms, from stocks and bonds to real estate and commodities. The goal is to put your money to work for you so that it can grow over time.

One of the most important things to understand about investing is the concept of risk. All investments carry some level of risk, which is the chance that you'll lose some or all of your money.

Generally speaking, investments that offer higher potential returns also come with higher levels of risk. That means, stocks, for example, can be riskier than bonds, but they also have the potential to offer higher returns over the long term.

Another key concept to understand is diversification. This simply means spreading your investments across a variety of different assets and industries so that you're not overly exposed to any one area. I’m sure you’ve heard the expression, don’t put all your eggs in one basket. Diversification can help reduce your overall risk and ensure your investment portfolio is better positioned for market ups and downs.

Now that we've covered some of the basics, let's talk about some of the key strategies for investing. One of the most popular approaches is known as buy-and-hold investing. This simply means buying stocks or other assets with the intention of holding onto them for the long term rather than trying to time the market by buying and selling frequently. The idea is that over time, the value of those assets will appreciate, potentially resulting in significant gains.

Another strategy is known as dollar-cost averaging. This involves investing a fixed amount of money at regular intervals regardless of the current market conditions. Doing this takes our human emotions out of the process, potentially improving your long-term returns as you take advantage of market dips to buy more shares at lower prices.

Finally, it's important to remember that investing is a long-term commitment. While there may be short-term fluctuations and volatility, the most successful investors are those who can stay the course and remain patient over the long term. That means avoiding the temptation to panic and make knee-jerk decisions based on market fluctuations and instead focusing on your long-term goals and strategies.

In conclusion, investing doesn't have to be intimidating or complicated. By understanding some of key concepts and strategies, anyone can get started with investing and potentially build wealth over time. Remember to focus on diversification, stay the course over the long term, and remain disciplined in your approach. With a little bit of knowledge and some patience, investing can be a powerful tool for building your financial future.

This article was submitted by the Association of Female Executives of Trinidad and Tobago (AFETT).

AFETT is a non-profit organisation formed in 2002 with the goal of bringing together professional women and engaging in networking opportunities, training and business development.