Investments can only be profitable when all risks are calculated. Only those who factor in each and every element of this process can invest successfully.
This article is going to reveal what a beginner needs to do to make solid money by investing.
1. What is an investment
2. Types of investment portfolios
3. Investment checklist
4. Active investing
What is an investment
An investment is the act of allocating money to make a profit in the future. If you want to profit from investments, you should pick profitable projects. And if you want to multiply your investments, experts advise building an investment portfolio.
An investment portfolio is a basket of investments to be diversified, i.e., investments that are divided into portions. If one part plummets, the other will save your portfolio.
Types of investment portfolios
Investors are free to decide what financial instruments their portfolios will include. It depends on their goals, finances, risks, and expected profit.
According to the risk-reward ratio, investment portfolios fall into:
- Conservative portfolio that is comprised of government securities, stocks, and gold. It is based on market stability.
- Moderate portfolio that includes high-yield (and high-risk) securities and low-yield securities, i.e., risk-free securities (government bonds).
- Aggressive portfolio that includes high-yield and high-risk securities. Investors should constantly monitor this portfolio.
If you wish to pick an investment instrument correctly, you need to analyze what makes investments successful. Let's dissect them step by step.
Step 1: Investment зeriod
If you want to build an elaborate investment portfolio, you should decide on your investment period. In case of short-term investments, it is better for you to build a bond portfolio.
When it comes to stocks, this portfolio will be illiquid in the short term. You may sell it for less than the original cost. In this case, if you opt for stocks, you'd better play the long game. After all, if you look at how Amazon stocks have soared over five years…
Step 2: Assess risks
It's up to you whether to take the risk or to play it safe. You should set your risk limit, i.e., maximum losses you are comfortable with. Then pick your assets depending on your investment goals.
Step 3: Investment goals
Aggressive portfolios and equity investments can help you maximize your capital. You can build a conservative portfolio to receive interest. A moderate portfolio can help you earn and save money. Whatever the case may be, this classification is purely hypothetical, since investing is primarily aimed at magnifying capital gains.
Step 4: Build a portfolio
Map out your portfolio structure. The right investments have to be diversified. Your portfolio should include both stable and emerging market stocks. Assets, such as precious metals, gold, copper, and other valuable resources, can be added to an investment portfolio.
Step 5: Entry time
You should acquire investment instruments at the right time. There are two types of markets—bullish (rising) and bearish (falling). When the market is bullish, it is better to buy stocks and then sell them at a higher price. In contrast, when the market is bearish, it makes more sense to invest in protective assets.
Investing is not that hard when you know what to do and how to do it. In any case, you should examine statistics on portfolio instruments, track many indicators to buy or sell assets in time, and rebalance.
Unlike investment in individual stocks, investing in stock indices will make the process relatively easier. However, you still need to do a proper analysis and track down statistics.
There is a way out for those who want to make a profit in financial markets but are not so keen on going too deep into money-making mechanics. This is an active investment with the help of TIMA accounts.
What does investment in a TIMA account imply? Investors pick a manager who will enhance their capital for them in financial markets. Your investments will be protected by our traders who choose the right instruments and Risk Manager, a free solution that helps manager risks automatically.
Given the constant economic swings, investing can become a great safety net. That said, you should always stick to a correct approach, which is why beginners have two options - either learn everything from books, webinars, and mentor's help or let a professional maximize their capital for them instead.
Carefully read the manager's offer before investing. If any terms and conditions outlined therein do not work for you, please choose a different TIMA account.