Investing can feel daunting if you have never done it before. Here is a straightforward guide to the key principles every new investor should know.
Many people put off investing because it feels complicated or risky. But with the right foundations in place, investing can be one of the most effective ways to grow your wealth over time. Here are the key principles to understand before you get started.
Why Invest at All?
Leaving your money sitting in a savings account might feel safe, but inflation quietly chips away at what it can actually buy. Investing gives your money the opportunity to grow over time and, hopefully, stay ahead of inflation. It is not about getting rich overnight. It is about giving your money a better chance of working harder for your future.
Risk and Return
All investments carry some level of risk. Generally speaking, the higher the potential return, the higher the risk. Understanding your own attitude to risk — and how much volatility you can comfortably tolerate — is one of the first steps in building an investment strategy that works for you.
Diversification
One of the most important principles in investing is not putting all your eggs in one basket. Spreading your money across different asset classes, sectors and geographies helps reduce the impact of any single investment performing poorly.
Time in the Market
Investing is a long-term activity. Trying to time the market — buying at the lowest point and selling at the highest — is notoriously difficult, even for professionals. Staying invested over time, through market ups and downs, has historically produced better results than trying to predict short-term movements.
Taking the First Step
If you are ready to start investing but are not sure where to begin, speaking to a financial adviser is a sensible first step. At Open Door Wealth, we help clients build investment strategies that reflect their goals, timeline and attitude to risk.
Steve Ralph
Financial Adviser