The dynamics of trading and investing your money can be difficult at times to fully guage. You’d like to get your money working for you, rather than lumping it into a savings account where interest rates are depressingly low, but you might not be too sure where to begin. If you’re finding yourself struggling to take the plunge and invest your money, then take a look at our golden rules to follow when it comes to investing your cash wisely.
Know your Finances
This may seem obvious, but the most important thing to consider before you pump your money into any investments is the true state of your personal finances. Take into account any debts you may owe, or heavy expenditure that you may have to make in the short to mid-term future, and account accordingly.
A good rule to follow is to never invest money that you actually need, whether it’s to repay a debt, to buy a big-ticket item or for rent payments or general living. Investments should never be seen as a quick fix for financial trouble, so be comfortable in your personal finances before you start investing.
Know your Markets
Equally as important as understanding your financial situation is to understand the markets you want to invest in. Do plenty of research before even thinking about putting money down, find out the basics of CFD trading and exchanges like the FTSE 100, and brush up on your general understanding of the stock exchange.
If you’re investing in one market in particular, ensure that you are aware of how that market generally performs throughout a financial year, and whether or not there are any factors that might make that a wise or unwise investment. Never invest for the sake of investing – always be sure that there is a potential return for you that is worthwhile.
Spread your Investments
This may depend on the amount of money you are comfortable investing, but generally it is a good idea to spread your money around in a number of different shares or markets. No-one wants to plump money on a single company or market, only to find that company struggling down the line and risking you losing much of your precious cash.
By spreading your stakes you multiply your chances of success. It’s important that if you do deploy this method, to keep an eye on all your investments regularly, so you’re in the loop as to how they’re performing.
Don’t be Afraid to Play the Waiting Game
The best investments are the ones that are worth waiting for the profits of. As we mentioned earlier, investing in things like stocks should never be treated as a quick fix, but rather as a measured decision with clear potential down the line.
It can also be important not to panic if your investment undergoes a bit of a slump. Depending on what you’ve invested in, stock prices usually come out the other side of a difficult period, so don’t panic or hit the eject button as soon as you see your investment suffering. Analyse the situation and remember that the long game is often the most rewarding.