Time and again, wealthy people state that one of the best things you can do with your money, and to grow it, is to invest it wisely. The grandmaster of investing, Warren Buffett, has written all kinds of guides on how to expand your wealth through smart investing. When it comes to investing for the first time though, what should you be looking for in terms of safety?
As a complete novice to investing, one of the best things you can do is start looking for the best shares to buy for beginners. This is easier said than done sometimes, but the AskTraders link here is a fantastic platform to launch from.
Beyond this guide, however, it pays to really know what the best practices are when it comes to hunting down safety on the markets. Here are a few key points that we think you should always consider.
Keep your eye on the news
One of the best things you can do right away is to pick yourself an industry or sphere and stick with it. For example, you might choose automotive. This means that you may wish to keep an eye on companies such as Tesla and General Motors, to offer two big examples.
However, you’ll need to follow these firms in the news. Filter down news services and financial feeds to one or two sectors that interest you and monitor these feeds for a while. Which big names, if any, consistently pop up as innovation leaders? Which regularly get good press, or announce big financial successes?
It seems obvious, but the safest companies to invest in are those that are great at generating good news. Tesla is an interesting example, as while it experiences shakiness here and there, over the past two to three years, it has led CEO Elon Musk to become one of the richest people on the planet.
Look at long-term success
Again, this may seem obvious, but it’s a rookie mistake to not look at the bigger picture. Many first-time investors are very quick to look at recent peaks and dips in the stock market. One of the main reasons why cryptocurrency markets are so popular is volatility. However, this means that you are looking at a stock that’s likely to drop as much as it is to spike.
Therefore, look over a long period of time. Consider, say, three to four years of activity. 2020, in particular, is going to be a fantastic barometer for company safety and success. The coronavirus pandemic changed the landscape for just about everything! However, long-term success isn’t always a mark of safety. Some successes – again, like Tesla’s, or like Facebook’s – came from big risks.
This means that you are going to need to balance years of clear stock growth and/or stability with other research, such as recent news or movements in the press. There is a danger that by going too safe, you could miss out on massive dividends further down the line.
Learn to diversify
This bears noting as a side point to looking for ‘safe’ companies to invest in. We already mentioned a thing or two about portfolio diversification recently, and it bears repeating that keeping your options open is absolutely vital. Remember the phrase ‘don’t put all your eggs in one basket’? The same really does apply to trading and investing.
Even if you throw all your money behind a safe company with steady growth, there are chances that you stand to miss out on. Risks really do make for big investment success, and if you are a beginner trader, then you should balance a few safe options with a small risk or two, to begin with. This way, you will at least have access to a taste of what’s out there, even if it means that you risk losing a small amount of capital.
Diversification is whatever you want it to be. If you want to place all your capital in safe companies, then that is your prerogative. However, anyone deeply involved in markets today will tell you that safety only gets you so far.
Are you ready to take on the markets? It’s a wild world out there, and this means that you are going to need to work hard to build up a confident portfolio. Take a close look at company histories and watch their impact on the global stage before you go ahead and make any major purchases – and then don’t be afraid to take small and measured risks as time moves on.